2007 Minnesota Statutes

256B.431 RATE DETERMINATION.
    Subdivision 1. In general. The commissioner shall determine prospective payment rates
for resident care costs. For rates established on or after July 1, 1985, the commissioner shall
develop procedures for determining operating cost payment rates that take into account the mix of
resident needs, geographic location, and other factors as determined by the commissioner. The
commissioner shall consider whether the fact that a facility is attached to a hospital or has an
average length of stay of 180 days or less should be taken into account in determining rates. The
commissioner shall consider the use of the standard metropolitan statistical areas when developing
groups by geographic location. The commissioner shall provide notice to each nursing facility on
or before August 15 of the rates effective for the following rate year except that if legislation is
pending on August 15 that may affect rates for nursing facilities, the commissioner shall set the
rates after the legislation is enacted and provide notice to each facility as soon as possible.
    Compensation for top management personnel shall continue to be categorized as a general
and administrative cost and is subject to any limits imposed on that cost category.
    Subd. 2.[Repealed, 2000 c 449 s 15]
    Subd. 2a.[Repealed, 2000 c 449 s 15]
    Subd. 2b. Operating costs after July 1, 1985. (a) For rate years beginning on or after July
1, 1985, the commissioner shall establish procedures for determining per diem reimbursement
for operating costs.
(b) The commissioner shall contract with an econometric firm with recognized expertise
in and access to national economic change indices that can be applied to the appropriate cost
categories when determining the operating cost payment rate.
(c) The commissioner shall analyze and evaluate each nursing facility's cost report of
allowable operating costs incurred by the nursing facility during the reporting year immediately
preceding the rate year for which the payment rate becomes effective.
(d) The commissioner shall establish limits on actual allowable historical operating cost
per diems based on cost reports of allowable operating costs for the reporting year that begins
October 1, 1983, taking into consideration relevant factors including resident needs, geographic
location, and size of the nursing facility. In developing the geographic groups for purposes of
reimbursement under this section, the commissioner shall ensure that nursing facilities in any
county contiguous to the Minneapolis-St. Paul seven-county metropolitan area are included in
the same geographic group. The limits established by the commissioner shall not be less, in the
aggregate, than the 60th percentile of total actual allowable historical operating cost per diems for
each group of nursing facilities established under subdivision 1 based on cost reports of allowable
operating costs in the previous reporting year. For rate years beginning on or after July 1, 1989,
facilities located in geographic group I as described in Minnesota Rules, part 9549.0052, on
January 1, 1989, may choose to have the commissioner apply either the care related limits or the
other operating cost limits calculated for facilities located in geographic group II, or both, if either
of the limits calculated for the group II facilities is higher. The efficiency incentive for geographic
group I nursing facilities must be calculated based on geographic group I limits. The phase-in
must be established utilizing the chosen limits. For purposes of these exceptions to the geographic
grouping requirements, the definitions in Minnesota Rules, parts 9549.0050 to 9549.0059
(Emergency), and 9549.0010 to 9549.0080, apply. The limits established under this paragraph
remain in effect until the commissioner establishes a new base period. Until the new base period
is established, the commissioner shall adjust the limits annually using the appropriate economic
change indices established in paragraph (e). In determining allowable historical operating cost per
diems for purposes of setting limits and nursing facility payment rates, the commissioner shall
divide the allowable historical operating costs by the actual number of resident days, except
that where a nursing facility is occupied at less than 90 percent of licensed capacity days, the
commissioner may establish procedures to adjust the computation of the per diem to an imputed
occupancy level at or below 90 percent. The commissioner shall establish efficiency incentives as
appropriate. The commissioner may establish efficiency incentives for different operating cost
categories. The commissioner shall consider establishing efficiency incentives in care related cost
categories. The commissioner may combine one or more operating cost categories and may use
different methods for calculating payment rates for each operating cost category or combination
of operating cost categories. For the rate year beginning on July 1, 1985, the commissioner shall:
(1) allow nursing facilities that have an average length of stay of 180 days or less in their
skilled nursing level of care, 125 percent of the care related limit and 105 percent of the other
operating cost limit established by rule; and
(2) exempt nursing facilities licensed on July 1, 1983, by the commissioner to provide
residential services for the physically disabled under Minnesota Rules, parts 9570.2000 to
9570.3600, from the care related limits and allow 105 percent of the other operating cost limit
established by rule.
For the purpose of calculating the other operating cost efficiency incentive for nursing
facilities referred to in clause (1) or (2), the commissioner shall use the other operating cost limit
established by rule before application of the 105 percent.
(e) The commissioner shall establish a composite index or indices by determining the
appropriate economic change indicators to be applied to specific operating cost categories or
combination of operating cost categories.
(f) Each nursing facility shall receive an operating cost payment rate equal to the sum of the
nursing facility's operating cost payment rates for each operating cost category. The operating cost
payment rate for an operating cost category shall be the lesser of the nursing facility's historical
operating cost in the category increased by the appropriate index established in paragraph (e) for
the operating cost category plus an efficiency incentive established pursuant to paragraph (d) or
the limit for the operating cost category increased by the same index. If a nursing facility's actual
historic operating costs are greater than the prospective payment rate for that rate year, there
shall be no retroactive cost settle-up. In establishing payment rates for one or more operating
cost categories, the commissioner may establish separate rates for different classes of residents
based on their relative care needs.
(g) The commissioner shall include the reported actual real estate tax liability or payments
in lieu of real estate tax of each nursing facility as an operating cost of that nursing facility.
Allowable costs under this subdivision for payments made by a nonprofit nursing facility that
are in lieu of real estate taxes shall not exceed the amount which the nursing facility would have
paid to a city or township and county for fire, police, sanitation services, and road maintenance
costs had real estate taxes been levied on that property for those purposes. For rate years
beginning on or after July 1, 1987, the reported actual real estate tax liability or payments in lieu
of real estate tax of nursing facilities shall be adjusted to include an amount equal to one-half
of the dollar change in real estate taxes from the prior year. The commissioner shall include a
reported actual special assessment, and reported actual license fees required by the Minnesota
Department of Health, for each nursing facility as an operating cost of that nursing facility. For
rate years beginning on or after July 1, 1989, the commissioner shall include a nursing facility's
reported Public Employee Retirement Act contribution for the reporting year as apportioned to
the care-related operating cost categories and other operating cost categories multiplied by the
appropriate composite index or indices established pursuant to paragraph (e) as costs under this
paragraph. Total adjusted real estate tax liability, payments in lieu of real estate tax, actual special
assessments paid, the indexed Public Employee Retirement Act contribution, and license fees paid
as required by the Minnesota Department of Health, for each nursing facility (1) shall be divided
by actual resident days in order to compute the operating cost payment rate for this operating cost
category, (2) shall not be used to compute the care-related operating cost limits or other operating
cost limits established by the commissioner, and (3) shall not be increased by the composite index
or indices established pursuant to paragraph (e), unless otherwise indicated in this paragraph.
(h) For rate years beginning on or after July 1, 1987, the commissioner shall adjust the rates
of a nursing facility that meets the criteria for the special dietary needs of its residents and the
requirements in section 31.651. The adjustment for raw food cost shall be the difference between
the nursing facility's allowable historical raw food cost per diem and 115 percent of the median
historical allowable raw food cost per diem of the corresponding geographic group.
The rate adjustment shall be reduced by the applicable phase-in percentage as provided
under subdivision 2h.
    Subd. 2c. Operating costs after July 1, 1986. For rate years beginning on or after July 1,
1986, the commissioner may allow a one time adjustment to historical operating costs of a nursing
facility that has been found by the commissioner of health to be significantly below care related
minimum standards appropriate to the mix of resident needs in that nursing facility when it is
determined by the commissioners of health and human services that the nursing facility is unable
to meet minimum standards through reallocation of nursing facility costs and efficiency incentives
or allowances. In developing procedures to allow adjustments, the commissioner shall specify the
terms and conditions governing any additional payments made to a nursing facility as a result of
the adjustment. The commissioner shall establish procedures to recover amounts paid under this
subdivision, in whole or in part, and to adjust current and future rates, for nursing facilities that
fail to use the adjustment to satisfy care related minimum standards.
    Subd. 2d. Cost report or audit. If an annual cost report or field audit indicates that
expenditures for direct resident care have been reduced in amounts large enough to indicate a
possible detrimental effect on the quality of care, the commissioner shall notify the commissioner
of health and the interagency long-term care planning committee. If a field audit reveals that
unallowable expenditures have been included in the nursing facility's historical operating costs,
the commissioner shall disallow the expenditures and recover the entire overpayment. The
commissioner shall establish, by rule, procedures for assessing an interest charge at the rate
determined for unpaid taxes or penalties under section 270C.40 on any outstanding balance
resulting from an overpayment or underpayment.
    Subd. 2e. Contracts for services for ventilator-dependent persons. (a) The commissioner
may negotiate with a nursing facility eligible to receive medical assistance payments to provide
services to a ventilator-dependent person identified by the commissioner according to criteria
developed by the commissioner, including:
    (1) nursing facility care has been recommended for the person by a preadmission screening
team;
    (2) the person has been hospitalized and no longer requires inpatient acute care hospital
services; and
    (3) the commissioner has determined that necessary services for the person cannot be
provided under existing nursing facility rates.
    The commissioner may negotiate an adjustment to the operating cost payment rate for
a nursing facility with a resident who is ventilator-dependent, for that resident. The negotiated
adjustment must reflect only the actual additional cost of meeting the specialized care needs of a
ventilator-dependent person identified by the commissioner for whom necessary services cannot
be provided under existing nursing facility rates and which are not otherwise covered under
Minnesota Rules, parts 9549.0010 to 9549.0080 or 9505.0170 to 9505.0475. For persons who
are initially admitted to a nursing facility before July 1, 2001, and have their payment rate under
this subdivision negotiated after July 1, 2001, the negotiated payment rate must not exceed 200
percent of the highest multiple bedroom payment rate for the facility, as initially established by
the commissioner for the rate year for case mix classification K; or, upon implementation of
the RUG's-based case mix system, 200 percent of the highest RUG's rate. For persons initially
admitted to a nursing facility on or after July 1, 2001, the negotiated payment rate must not exceed
300 percent of the facility's multiple bedroom payment rate for case mix classification K; or, upon
implementation of the RUG's-based case mix system, 300 percent of the highest RUG's rate. The
negotiated adjustment shall not affect the payment rate charged to private paying residents under
the provisions of section 256B.48, subdivision 1.
    (b) Effective July 1, 2007, or upon opening a unit of at least ten beds dedicated to care
of ventilator-dependent persons in partnership with Mayo Health Systems, whichever is later,
the operating payment rates for residents determined eligible under paragraph (a) of a nursing
facility in Waseca County that on February 1, 2007, was licensed for 70 beds and reimbursed
under this section, section 256B.434, or section 256B.441, shall be 300 percent of the facility's
highest RUG rate.
    Subd. 2f.[Repealed, 2000 c 449 s 15]
    Subd. 2g. Required consultants. Costs considered general and administrative costs under
section 256B.421 must be included in general and administrative costs in total, without direct
or indirect allocation to other cost categories. In a nursing facility of 60 or fewer beds, part
of an administrator's salary may be allocated to other cost categories to the extent justified in
records kept by the nursing facility. Central or home office costs representing services of required
consultants in areas including, but not limited to, dietary, pharmacy, social services, or activities
may be allocated to the appropriate department, but only if those costs are directly identified
by the nursing facility. Central, affiliated, or corporate office costs representing services of
consultants not required by law in the areas of nursing, quality assurance, medical records, dietary,
other care related services, and plant operations may be allocated to the appropriate operating cost
category of a nursing facility according to paragraphs (a) to (e).
(a) Only the salaries, fringe benefits, and payroll taxes associated with the individual
performing the service may be allocated. No other costs may be allocated.
(b) The allocation must be based on direct identification and only to the extent justified in
time distribution records that show the actual time spent by the consultant performing the services
in the nursing facility.
(c) The cost in paragraph (a) for each consultant must not be allocated to more than one
operating cost category in the nursing facility. If more than one nursing facility is served by a
consultant, all nursing facilities shall allocate the consultant's cost to the same operating category.
(d) Top management personnel must not be considered consultants.
(e) The consultant's full-time responsibilities shall be to provide the services identified in
this item.
    Subd. 2h.[Repealed, 2000 c 449 s 15]
    Subd. 2i. Operating costs after July 1, 1988. (a) Other operating cost limits.For rate
years beginning on or after July 1, 1989, the adjusted other operating cost limits must be indexed
as in Minnesota Rules, part 9549.0056, subparts 3 and 4. For the rate period beginning October 1,
1992, and for rate years beginning after June 30, 1993, the amount of the surcharge under section
256.9657, subdivision 1, shall be included in the plant operations and maintenance operating cost
category. The surcharge shall be an allowable cost for the purpose of establishing the payment rate.
(b) Care-related operating cost limits. For rate years beginning on or after July 1, 1989, the
adjusted care-related limits must be indexed as in Minnesota Rules, part 9549.0056, subparts 1
and 2.
(c) Salary adjustment per diem. Effective July 1, 1998, to June 30, 2000, the commissioner
shall make available the salary adjustment per diem calculated in clause (1) or (2) to the total
operating cost payment rate of each nursing facility reimbursed under this section or section
256B.434. The salary adjustment per diem for each nursing facility must be determined as follows:
(1) For each nursing facility that reports salaries for registered nurses, licensed practical
nurses, and aides, orderlies and attendants separately, the commissioner shall determine the
salary adjustment per diem by multiplying the total salaries, payroll taxes, and fringe benefits
allowed in each operating cost category, except management fees and administrator and central
office salaries and the related payroll taxes and fringe benefits, by 3.0 percent and then dividing
the resulting amount by the nursing facility's actual resident days.
(2) For each nursing facility that does not report salaries for registered nurses, licensed
practical nurses, aides, orderlies, and attendants separately, the salary adjustment per diem is the
weighted average salary adjustment per diem increase determined under clause (1).
(3) A nursing facility may apply for the salary adjustment per diem calculated under clauses
(1) and (2). The application must be made to the commissioner and contain a plan by which the
nursing facility will distribute the salary adjustment to employees of the nursing facility. In order
to apply for a salary adjustment, a nursing facility reimbursed under section 256B.434, must
report the information required by clause (1) or (2) in the application, in the manner specified by
the commissioner. For nursing facilities in which the employees are represented by an exclusive
bargaining representative, an agreement negotiated and agreed to by the employer and the
exclusive bargaining representative, after July 1, 1998, may constitute the plan for the salary
distribution. The commissioner shall review the plan to ensure that the salary adjustment per diem
is used solely to increase the compensation of nursing home facility employees. To be eligible, a
facility must submit its plan for the salary distribution by December 31, 1998. If a facility's plan
for salary distribution is effective for its employees after July 1, 1998, the salary adjustment cost
per diem shall be effective the same date as its plan.
(4) Additional costs incurred by nursing facilities as a result of this salary adjustment are not
allowable costs for purposes of the September 30, 1998, cost report.
(d) New base year. The commissioner shall establish a new base year for the reporting
years ending September 30, 1991, and September 30, 1992. In establishing a new base year, the
commissioner must take into account:
(1) statutory changes made in geographic groups;
(2) redefinitions of cost categories; and
(3) reclassification, pass-through, or exemption of certain costs.
    Subd. 2j. Hospital-attached nursing facility status. (a) For the purpose of setting rates
under Minnesota Rules, parts 9549.0010 to 9549.0080, for rate years beginning after June 30,
1989, a hospital-attached nursing facility means a nursing facility which meets the requirements
of clauses (1) to (3):
(1) the nursing facility is recognized by the federal Medicare program to be a hospital-based
nursing facility for purposes of being subject to higher cost limits accorded hospital-based
nursing facilities under the Medicare program, or, prior to June 30, 1983, was classified as a
hospital-attached nursing facility under Minnesota Rules, parts 9510.0010 to 9510.0480;
(2) the nursing facility's cost report filed under Minnesota Rules, parts 9549.0010 to
9549.0080, shall use the same cost allocation principles and methods used in the reports filed
for the Medicare program except as provided in clause (3); and
(3) direct identification of costs to the nursing facility cost center will be permitted only
when the comparable hospital costs have also been directly identified to a cost center which is
not allocated to the nursing facility.
(b) For rate years beginning after June 30, 1989, a nursing facility and hospital, which have
applied for hospital-based nursing facility status under the federal Medicare program during the
reporting year or the nine-month period following the nursing facility's reporting year, shall
be considered a hospital-attached nursing facility for purposes of setting payment rates under
Minnesota Rules, parts 9549.0010 to 9549.0080, for the rate year following the reporting year or
the nine-month period in which the facility made its Medicare application. The nursing facility
must file its cost report or an amended cost report for that reporting year before the following rate
year using Medicare principles and Medicare's recommended cost allocation methods had the
Medicare program's hospital-based nursing facility status been granted to the nursing facility. For
each subsequent rate year, the nursing facility must meet the definition requirements in paragraph
(a). If the nursing facility is denied hospital-based nursing facility status under the Medicare
program, the nursing facility's payment rates for the rate years the nursing facility was considered
to be a hospital-attached nursing facility pursuant to this paragraph shall be recalculated treating
the nursing facility as a non-hospital-attached nursing facility.
(c) For rate years beginning on or after July 1, 1995, a nursing facility shall be considered a
hospital attached nursing facility for purposes of setting payment rates under Minnesota Rules,
parts 9549.0010 to 9549.0080 and this section if it meets the requirements of paragraphs (a)
and (b), and
(1) the hospital and nursing facility are physically attached or connected by a tunnel or
skyway; or
(2) the nursing facility was recognized by the Medicare program as hospital attached as of
January 1, 1995, and this status has been maintained continuously.
    Subd. 2k. Operating costs after July 1, 1989. For rate years beginning on or after July 1,
1989, a nursing facility that is exempt under subdivision 2b, paragraph (d), clause (2); whose
total number of licensed beds are licensed under Minnesota Rules, parts 9570.2000 to 9570.3600;
and that maintains an average length of stay of less than 365 days during each reporting year, is
limited to 140 percent of the other-operating-cost limit for hospital-attached nursing facilities
as established by Minnesota Rules, part 9549.0055, subpart 2, item E, subitem (2), as modified
by subdivision 2i, paragraph (a). For purposes of this subdivision, the nursing facility's average
length of stay must be computed by dividing the nursing facility's actual resident days for the
reporting year by the nursing facility's total discharges for that reporting year.
    Subd. 2l. Inflation adjustments after July 1, 1990. (a) For rate years beginning on or after
July 1, 1990, the forecasted composite price index for a nursing facility's allowable operating
cost per diems shall be determined using Data Resources, Inc., forecast for change in the Nursing
Home Market Basket. The commissioner of human services shall use the indices as forecasted by
Data Resources, Inc., in the fourth quarter of the calendar year preceding the rate year.
(b) For rate years beginning on or after July 1, 1992, the commissioner shall index the
prior year's operating cost limits by the percentage change in the Data Resources, Inc., Nursing
Home Market Basket between the midpoint of the current reporting year and the midpoint of the
previous reporting year. The commissioner shall use the indices as forecasted by Data Resources,
Inc., in the fourth quarter of the calendar year preceding the rate year.
(c) For rate years beginning on or after July 1, 1993, the commissioner shall not provide
automatic annual inflation adjustments for nursing facilities. The commissioner of finance shall
include annual adjustments in operating costs for nursing facilities as a budget change request in
each biennial detailed expenditure budget submitted to the legislature under section 16A.11.
    Subd. 2m.[Repealed, 2000 c 449 s 15]
    Subd. 2n. Efficiency incentive reductions for substandard care. For rate years beginning
on or after July 1, 1991, the efficiency incentive established under subdivision 2b, paragraph (d),
shall be reduced or eliminated for nursing facilities determined by the commissioner of health
under section 144A.10, subdivision 4, to have uncorrected or repeated violations which create a
risk to resident care, safety, or rights, except for uncorrected or repeated violations relating to a
facility's physical plant. Upon being notified by the commissioner of health of uncorrected or
repeated violations, the commissioner of human services shall require the nursing facility to use
efficiency incentive payments to correct the violations. The commissioner of human services shall
require the nursing facility to forfeit efficiency incentive payments for failure to correct the
violations. Any forfeiture shall be limited to the amount necessary to correct the violation.
    Subd. 2o. Special payment rates for short-stay nursing facilities. Notwithstanding
contrary provisions of this section and rules adopted by the commissioner, for the rate years
beginning on or after July 1, 1993, a nursing facility whose average length of stay for the
preceding reporting year is (1) less than 180 days; or (2) less than 225 days in a nursing facility
with more than 315 licensed beds must be reimbursed for allowable costs up to 125 percent of
the total care-related limit and 105 percent of the other-operating-cost limit for hospital-attached
nursing facilities. A nursing facility that received the benefit of this limit during the rate year
beginning July 1, 1992, continues to receive this rate during the rate year beginning July 1, 1993,
even if the facility's average length of stay is more than 180 days in the rate years subsequent
to the rate year beginning July 1, 1991. For purposes of this subdivision, a nursing facility shall
compute its average length of stay by dividing the nursing facility's actual resident days for the
reporting year by the nursing facility's total resident discharges for that reporting year.
    Subd. 2p.[Repealed, 2000 c 449 s 15]
    Subd. 2q.[Repealed, 2000 c 449 s 15]
    Subd. 2r. Payment restrictions on leave days. Effective July 1, 1993, the commissioner
shall limit payment for leave days in a nursing facility to 79 percent of that nursing facility's
total payment rate for the involved resident. For services rendered on or after July 1, 2003, for
facilities reimbursed under this section or section 256B.434, the commissioner shall limit payment
for leave days in a nursing facility to 60 percent of that nursing facility's total payment rate
for the involved resident.
    Subd. 2s. Nonallowable cost. Costs incurred for any activities which are directed at or are
intended to influence or dissuade employees in the exercise of their legal rights to freely engage in
the process of selecting an exclusive representative for the purpose of collective bargaining with
their employer shall not be allowable for purposes of setting payment rates.
    Subd. 2t. Payment limitation. For services rendered on or after July 1, 2003, for facilities
reimbursed under this section or section 256B.434, the Medicaid program shall only pay a
co-payment during a Medicare-covered skilled nursing facility stay if the Medicare rate less
the resident's co-payment responsibility is less than the Medicaid RUG-III case-mix payment
rate. The amount that shall be paid by the Medicaid program is equal to the amount by which
the Medicaid RUG-III case-mix payment rate exceeds the Medicare rate less the co-payment
responsibility. Health plans paying for nursing home services under section 256B.69, subdivision
6a , may limit payments as allowed under this subdivision.
    Subd. 3.[Repealed, 2000 c 449 s 15]
    Subd. 3a. Property-related costs after July 1, 1985. (a) For rate years beginning on or after
July 1, 1985, the commissioner, by permanent rule, shall reimburse nursing facility providers that
are vendors in the medical assistance program for the rental use of real estate and depreciable
equipment. "Real estate" means land improvements, buildings, and attached fixtures used directly
for resident care. "Depreciable equipment" means the standard movable resident care equipment
and support service equipment generally used in long-term care facilities.
(b) In developing the method for determining payment rates for the rental use of nursing
facilities, the commissioner shall consider factors designed to:
(1) simplify the administrative procedures for determining payment rates for property-related
costs;
(2) minimize discretionary or appealable decisions;
(3) eliminate any incentives to sell nursing facilities;
(4) recognize legitimate costs of preserving and replacing property;
(5) recognize the existing costs of outstanding indebtedness allowable under the statutes
and rules in effect on May 1, 1983;
(6) address the current value of, if used directly for patient care, land improvements,
buildings, attached fixtures, and equipment;
(7) establish an investment per bed limitation;
(8) reward efficient management of capital assets;
(9) provide equitable treatment of facilities;
(10) consider a variable rate; and
(11) phase-in implementation of the rental reimbursement method.
(c) For rate years beginning on or after July 1, 1987, a nursing facility which has reduced
licensed bed capacity after January 1, 1986, shall be allowed to:
(1) aggregate the applicable investment per bed limits based on the number of beds licensed
prior to the reduction; and
(2) establish capacity days for each rate year following the licensure reduction based on the
number of beds licensed on the previous April 1 if the commissioner is notified of the change by
April 4. The notification must include a copy of the delicensure request that has been submitted to
the commissioner of health.
(d) For rate years beginning on or after July 1, 1989, the interest expense that results from a
refinancing of a nursing facility's demand call loan, when the loan that must be refinanced was
incurred before May 22, 1983, is an allowable interest expense if:
(1) the demand call loan or any part of it was in the form of a loan that was callable at
the demand of the lender;
(2) the demand call loan or any part of it was called by the lender through no fault of the
nursing facility;
(3) the demand call loan or any part of it was made by a government agency operating
under a statutory or regulatory loan program;
(4) the refinanced debt does not exceed the sum of the allowable remaining balance of the
demand call loan at the time of payment on the demand call loan and refinancing costs;
(5) the term of the refinanced debt does not exceed the remaining term of the demand call
loan, had the debt not been subject to an on-call payment demand; and
(6) the refinanced debt is not a debt between related organizations as defined in Minnesota
Rules, part 9549.0020, subpart 38.
    Subd. 3b.[Repealed, 2000 c 449 s 15]
    Subd. 3c. Plant and maintenance costs. For the rate years beginning on or after July 1,
1987, the commissioner shall allow as an expense in the reporting year of occurrence the lesser
of the actual allowable plant and maintenance costs for supplies, minor equipment, equipment
repairs, building repairs, purchased services and service contracts, except for arm's-length service
contracts whose primary purpose is supervision, or $325 per licensed bed.
    Subd. 3d.[Repealed, 2000 c 449 s 15]
    Subd. 3e. Hospital-attached convalescent and nursing care facilities. If a nonprofit
or community-operated hospital and attached convalescent and nursing care facility suspend
operation of the hospital, the surviving nursing care facility must be allowed to continue its status
as a hospital-attached convalescent and nursing care facility for reimbursement purposes in five
subsequent rate years. In the fourth year the facility shall receive 60 percent of the difference
between the hospital-attached limit and the freestanding nursing facility limit, and in the fifth year
the facility shall receive 30 percent of the difference.
    Subd. 3f. Property costs after July 1, 1988. (a) Investment per bed limit. For the rate year
beginning July 1, 1988, the replacement-cost-new per bed limit must be $32,571 per licensed
bed in multiple bedrooms and $48,857 per licensed bed in a single bedroom. For the rate year
beginning July 1, 1989, the replacement-cost-new per bed limit for a single bedroom must be
$49,907 adjusted according to Minnesota Rules, part 9549.0060, subpart 4, item A, subitem (1).
Beginning January 1, 1990, the replacement-cost-new per bed limits must be adjusted annually
as specified in Minnesota Rules, part 9549.0060, subpart 4, item A, subitem (1). Beginning
January 1, 1991, the replacement-cost-new per bed limits will be adjusted annually as specified
in Minnesota Rules, part 9549.0060, subpart 4, item A, subitem (1), except that the index
utilized will be the Bureau of Economic Analysis: Price Indexes for Private Fixed Investments
in Structures; Special Care.
    (b) Rental factor. For the rate year beginning July 1, 1988, the commissioner shall increase
the rental factor as established in Minnesota Rules, part 9549.0060, subpart 8, item A, by 6.2
percent rounded to the nearest 100th percent for the purpose of reimbursing nursing facilities for
soft costs and entrepreneurial profits not included in the cost valuation services used by the state's
contracted appraisers. For rate years beginning on or after July 1, 1989, the rental factor is the
amount determined under this paragraph for the rate year beginning July 1, 1988.
    (c) Occupancy factor. For rate years beginning on or after July 1, 1988, in order to
determine property-related payment rates under Minnesota Rules, part 9549.0060, for all nursing
facilities except those whose average length of stay in a skilled level of care within a nursing
facility is 180 days or less, the commissioner shall use 95 percent of capacity days. For a nursing
facility whose average length of stay in a skilled level of care within a nursing facility is 180 days
or less, the commissioner shall use the greater of resident days or 80 percent of capacity days but
in no event shall the divisor exceed 95 percent of capacity days.
    (d) Equipment allowance. For rate years beginning on July 1, 1988, and July 1, 1989, the
commissioner shall add ten cents per resident per day to each nursing facility's property-related
payment rate. The ten-cent property-related payment rate increase is not cumulative from rate
year to rate year. For the rate year beginning July 1, 1990, the commissioner shall increase each
nursing facility's equipment allowance as established in Minnesota Rules, part 9549.0060,
subpart 10, by ten cents per resident per day. For rate years beginning on or after July 1, 1991,
the adjusted equipment allowance must be adjusted annually for inflation as in Minnesota Rules,
part 9549.0060, subpart 10, item E. For the rate period beginning October 1, 1992, the equipment
allowance for each nursing facility shall be increased by 28 percent. For rate years beginning after
June 30, 1993, the allowance must be adjusted annually for inflation.
    (e) Post chapter 199 related-organization debts and interest expense. For rate years
beginning on or after July 1, 1990, Minnesota Rules, part 9549.0060, subpart 5, item E, shall not
apply to outstanding related organization debt incurred prior to May 23, 1983, provided that the
debt was an allowable debt under Minnesota Rules, parts 9510.0010 to 9510.0480, the debt is
subject to repayment through annual principal payments, and the nursing facility demonstrates
to the commissioner's satisfaction that the interest rate on the debt was less than market interest
rates for similar arm's-length transactions at the time the debt was incurred. If the debt was
incurred due to a sale between family members, the nursing facility must also demonstrate that
the seller no longer participates in the management or operation of the nursing facility. Debts
meeting the conditions of this paragraph are subject to all other provisions of Minnesota Rules,
parts 9549.0010 to 9549.0080.
    (f) Building capital allowance for nursing facilities with operating leases. For rate years
beginning on or after July 1, 1990, a nursing facility with operating lease costs incurred for the
nursing facility's buildings shall receive its building capital allowance computed in accordance
with Minnesota Rules, part 9549.0060, subpart 8. If an operating lease provides that the lessee's
rent is adjusted to recognize improvements made by the lessor and related debt, the costs for
capital improvements and related debt shall be allowed in the computation of the lessee's building
capital allowance, provided that reimbursement for these costs under an operating lease shall
not exceed the rate otherwise paid.
    Subd. 3g. Property costs after July 1, 1990, for certain facilities. (a) For rate years
beginning on or after July 1, 1990, nursing facilities that, on or after January 1, 1976, but prior to
January 1, 1987, were newly licensed after new construction, or increased their licensed beds
by a minimum of 35 percent through new construction, and whose building capital allowance is
less than their allowable annual principal and interest on allowable debt prior to the application
of the replacement-cost-new per bed limit and whose remaining weighted average debt
amortization schedule as of January 1, 1988, exceeded 15 years, must receive a property-related
payment rate equal to the greater of their rental per diem or their annual allowable principal and
allowable interest without application of the replacement-cost-new per bed limit, divided by their
capacity days as determined under Minnesota Rules, part 9549.0060, subpart 11, as modified by
subdivision 3f, paragraph (c), for the preceding reporting year, plus their equipment allowance.
A nursing facility that is eligible for a property-related payment rate under this subdivision and
whose property-related payment rate in a subsequent rate year is its rental per diem must continue
to have its property-related payment rates established for all future rate years based on the rental
reimbursement method in Minnesota Rules, part 9549.0060.
The commissioner may require the nursing facility to apply for refinancing as a condition of
receiving special rate treatment under this subdivision.
(b) If a nursing facility is eligible for a property-related payment rate under this subdivision,
and the nursing facility's debt is refinanced after October 1, 1988, the provisions in paragraphs
(1) to (7) also apply to the property-related payment rate for rate years beginning on or after
July 1, 1990.
(1) A nursing facility's refinancing must not include debts with balloon payments.
(2) If the issuance costs, including issuance costs on the debt refinanced, are financed as part
of the refinancing, the historical cost of capital assets limit in Minnesota Rules, part 9549.0060,
subpart 5, item A, subitem (6), includes issuance costs that do not exceed seven percent of the
debt refinanced, plus the related issuance costs. For purposes of this paragraph, issuance costs
means the fees charged by the underwriter, issuer, attorneys, bond raters, appraisers, and trustees,
and includes the cost of printing, title insurance, registration tax, and a feasibility study for the
refinancing of a nursing facility's debt. Issuance costs do not include bond premiums or discounts
when bonds are sold at other than their par value, points, or a bond reserve fund. To the extent
otherwise allowed under this paragraph, the straight-line amortization of the refinancing issuance
costs is not an allowable cost.
(3) The annual principal and interest expense payments and any required annual municipal
fees on the nursing facility's refinancing replace those of the refinanced debt and, together with
annual principal and interest payments on other allowable debts, are allowable costs subject to the
limitation on historical cost of capital assets plus issuance costs as limited in paragraph (2), if any.
(4) If the nursing facility's refinancing includes zero coupon bonds, the commissioner shall
establish a monthly debt service payment schedule based on an annuity that will produce an
amount equal to the zero coupon bonds at maturity. The term and interest rate is the term and
interest rate of the zero coupon bonds. Any refinancing to repay the zero coupon bonds is not an
allowable cost.
(5) The annual amount of annuity payments is added to the nursing facility's allowable
annual principal and interest payment computed in paragraph (3).
(6) The property-related payment rate is equal to the amount in paragraph (5), divided
by the nursing facility's capacity days as determined under Minnesota Rules, part 9549.0060,
subpart 11, as modified by subdivision 3f, paragraph (c), for the preceding reporting year plus an
equipment allowance.
(7) Except as provided in this subdivision, the provisions of Minnesota Rules, part 9549.0060
apply.
    Subd. 3h.[Repealed, 2000 c 449 s 15]
    Subd. 3i. Property costs for the rate year beginning July 1, 1990. Notwithstanding
Minnesota Rules, part 9549.0060, subpart 13, item H, the commissioner shall determine
property-related payment rates for nursing facilities for the rate year beginning July 1, 1990,
as follows:
(a) The property-related payment rate for a nursing facility that qualifies under subdivision
3g is the greater of the rate determined under that subdivision or the rate determined under
paragraph (c), (d), or (e), whichever is applicable.
(b) Nursing facilities shall be grouped according to the type of property-related payment rate
the commissioner determined for the rate year beginning July 1, 1989. A nursing facility whose
property-related payment rate was determined under Minnesota Rules, part 9549.0060, subpart
13, item A (full rental reimbursement), shall be considered group A. A nursing facility whose
property-related payment rate was determined under Minnesota Rules, part 9549.0060, subpart 13,
item B (phase-down to full rental reimbursement), shall be considered group B. A nursing facility
whose property-related payment rate was determined under Minnesota Rules, part 9549.0060,
subpart 13, item C or D (phase-up to full rental reimbursement), shall be considered group C.
(c) For the rate year beginning July 1, 1990, a group A nursing facility shall receive its
property-related payment rate determined under Minnesota Rules, parts 9549.0010 to 9549.0080,
and this section.
(d) For the rate year beginning July 1, 1990, a Group B nursing facility shall receive the
greater of 87 percent of the property-related payment rate in effect on July 1, 1989; or the
rental per diem rate determined under Minnesota Rules, parts 9549.0010 to 9549.0080, and this
section in effect on July 1, 1990; or the sum of 100 percent of the nursing facility's allowable
principal and interest expense, plus its equipment allowance multiplied by the resident days for
the reporting year ending September 30, 1989, divided by the nursing facility's capacity days as
determined under Minnesota Rules, part 9549.0060, subpart 11, as modified by subdivision 3f,
paragraph (c); except that the nursing facility's property-related payment rate must not exceed its
property-related payment rate in effect on July 1, 1989.
(e) For the rate year beginning July 1, 1990, a group C nursing facility shall receive its
property-related payment rate determined under Minnesota Rules, parts 9549.0010 to 9549.0080,
and this section, except the rate must not exceed the lesser of its property-related payment rate
determined for the rate year beginning July 1, 1989, multiplied by 116 percent or its rental per
diem rate determined effective July 1, 1990.
(f) The property-related payment rate for a nursing facility that qualifies for a rate adjustment
under Minnesota Rules, part 9549.0060, subpart 13, item G (special reappraisals), shall have
the property-related payment rate determined in paragraphs (a) to (e) adjusted according to the
provisions in that rule.
(g) Except as provided in subdivision 4, paragraph (f), and subdivision 11, a nursing facility
that has a change in ownership or a reorganization of provider entity is subject to the provisions of
Minnesota Rules, part 9549.0060, subpart 13, item F.
    Subd. 3j.[Repealed, 2000 c 449 s 15]
    Subd. 4.[Repealed, 2000 c 449 s 15]
    Subd. 5.[Repealed, 2000 c 449 s 15]
    Subd. 6.[Repealed, 1991 c 292 art 7 s 26]
    Subd. 7.[Repealed, 2000 c 449 s 15]
    Subd. 8.[Repealed, 2000 c 449 s 15]
    Subd. 9.[Repealed, 2000 c 449 s 15]
    Subd. 9a.[Repealed, 2000 c 449 s 15]
    Subd. 10. Property rate adjustments and construction projects. A nursing facility's
request for a property-related payment rate adjustment and the related supporting documentation
of project construction cost information must be submitted to the commissioner within 60 days
after the construction project's completion date to be considered eligible for a property-related
payment rate adjustment. The commissioner shall provide a rate notice reflecting the allowable
costs within 60 days after receiving all the necessary information to compute the rate adjustment.
No sooner than the effective date of the rate adjustment for the building project, a nursing facility
may adjust its rates by the amount anticipated to be allowed. Any amounts collected from private
pay residents in excess of the allowable rate must be repaid to private pay residents with interest
at the rate used by the commissioner of revenue for the late payment of taxes and in effect on the
date the rate increase is effective. Construction projects with completion dates within one year
of the completion date associated with the property rate adjustment request and phased projects
with project completion dates within three years of the last phase of the phased project must be
aggregated for purposes of the minimum thresholds in subdivisions 16 and 17, and the maximum
threshold in section 144A.071, subdivision 2. "Construction project" and "project construction
costs" have the meanings given them in Minnesota Statutes, section 144A.071, subdivision 1a.
    Subd. 11. Special property rate setting procedures for certain nursing facilities. (a)
Notwithstanding Minnesota Rules, part 9549.0060, subpart 13, item H, to the contrary, for the
rate year beginning July 1, 1990, a nursing facility leased prior to January 1, 1986, and currently
subject to adverse licensure action under section 144A.04, subdivision 4, paragraph (a), or section
144A.11, subdivision 2, and whose ownership changes prior to July 1, 1990, shall be allowed a
property-related payment equal to the lesser of its current lease obligation divided by its capacity
days as determined in Minnesota Rules, part 9549.0060, subpart 11, as modified by subdivision
3f, paragraph (c), or the frozen property-related payment rate in effect for the rate year beginning
July 1, 1989. For rate years beginning on or after July 1, 1991, the property-related payment rate
shall be its rental rate computed using the previous owner's allowable principal and interest
expense as allowed by the department prior to that prior owner's sale and lease-back transaction
of December 1985.
(b) Notwithstanding other provisions of applicable law, a nursing facility licensed for 122
beds on January 1, 1998, and located in Columbia Heights shall have its property-related payment
rate set under this subdivision. The commissioner shall make a rate adjustment by adding $2.41 to
the facility's July 1, 1997, property-related payment rate. The adjusted property-related payment
rate shall be effective for rate years beginning on or after July 1, 1998. The adjustment in this
paragraph shall remain in effect so long as the facility's rates are set under this section. If the
facility participates in the alternative payment system under section 256B.434, the adjustment
in this paragraph shall be included in the facility's contract payment rate. If historical rates or
property costs recognized under this section become the basis for future medical assistance
payments to the facility under a managed care, capitation, or other alternative payment system,
the adjustment in this paragraph shall be included in the computation of the facility's payments.
    Subd. 12.[Repealed, 2000 c 449 s 15]
    Subd. 13. Hold-harmless property-related rates. (a) Terms used in subdivisions 13 to 21
shall be as defined in Minnesota Rules, parts 9549.0010 to 9549.0080, and this section.
(b) Except as provided in this subdivision, for rate periods beginning on October 1, 1992,
and for rate years beginning after June 30, 1993, the property-related rate for a nursing facility
shall be the greater of $4 or the property-related payment rate in effect on September 30, 1992. In
addition, the incremental increase in the nursing facility's rental rate will be determined under
Minnesota Rules, parts 9549.0010 to 9549.0080, and this section.
(c) Notwithstanding Minnesota Rules, part 9549.0060, subpart 13, item F, a nursing
facility that has a sale permitted under subdivision 14 after June 30, 1992, shall receive the
property-related payment rate in effect at the time of the sale or reorganization. For rate periods
beginning after October 1, 1992, and for rate years beginning after June 30, 1993, a nursing
facility shall receive, in addition to its property-related payment rate in effect at the time of the
sale, the incremental increase allowed under subdivision 14.
(d) For rate years beginning after June 30, 1993, the property-related rate for a nursing
facility licensed after July 1, 1989, after relocating its beds from a separate nursing home to a
building formerly used as a hospital and sold during the cost reporting year ending September 30,
1991, shall be its property-related rate prior to the sale in addition to the incremental increases
provided under this section effective on October 1, 1992, of 29 cents per day, and any incremental
increases after October 1, 1992, calculated by using its rental rate under Minnesota Rules, parts
9549.0010 to 9549.0080, and this section, recognizing the current appraised value of the facility
at the new location, and including as allowable debt otherwise allowable debt incurred to remodel
the facility in the new location prior to the relocation of beds.
    Subd. 14. Limitations on sales of nursing facilities. (a) For rate periods beginning
on October 1, 1992, and for rate years beginning after June 30, 1993, a nursing facility's
property-related payment rate as established under subdivision 13 shall be adjusted by either
paragraph (b) or (c) for the sale of the nursing facility, including sales occurring after June 30,
1992, as provided in this subdivision.
(b) If the nursing facility's property-related payment rate under subdivision 13 prior to sale is
greater than the nursing facility's rental rate under Minnesota Rules, parts 9549.0010 to 9549.0080,
and this section prior to sale, the nursing facility's property-related payment rate after sale shall be
the greater of its property-related payment rate under subdivision 13 prior to sale or its rental rate
under Minnesota Rules, parts 9549.0010 to 9549.0080, and this section calculated after sale.
(c) If the nursing facility's property-related payment rate under subdivision 13 prior to sale
is equal to or less than the nursing facility's rental rate under Minnesota Rules, parts 9549.0010
to 9549.0080, and this section prior to sale, the nursing facility's property-related payment rate
after sale shall be the nursing facility's property-related payment rate under subdivision 13 plus
the difference between its rental rate calculated under Minnesota Rules, parts 9549.0010 to
9549.0080, and this section prior to sale and its rental rate calculated under Minnesota Rules,
parts 9549.0010 to 9549.0080, and this section calculated after sale.
(d) For purposes of this subdivision, "sale" means the purchase of a nursing facility's capital
assets with cash or debt. The term sale does not include a stock purchase of a nursing facility or
any of the following transactions:
(1) a sale and leaseback to the same licensee that does not constitute a change in facility
license;
(2) a transfer of an interest to a trust;
(3) gifts or other transfers for no consideration;
(4) a merger of two or more related organizations;
(5) a change in the legal form of doing business, other than a publicly held organization that
becomes privately held or vice versa;
(6) the addition of a new partner, owner, or shareholder who owns less than 20 percent of the
nursing facility or the issuance of stock; and
(7) a sale, merger, reorganization, or any other transfer of interest between related
organizations other than those permitted in this section.
(e) For purposes of this subdivision, "sale" includes the sale or transfer of a nursing facility
to a close relative as defined in Minnesota Rules, part 9549.0020, subpart 38, item C, upon the
death of an owner, due to serious illness or disability, as defined under the Social Security Act,
under United States Code, title 42, section 423(d)(1)(A), or upon retirement of an owner from the
business of owning or operating a nursing home at 62 years of age or older. For sales to a close
relative allowed under this paragraph, otherwise nonallowable debt resulting from seller financing
of all or a portion of the debt resulting from the sale shall be allowed and shall not be subject
to Minnesota Rules, part 9549.0060, subpart 5, item E, provided that in addition to existing
requirements for allowance of debt and interest, the debt is subject to repayment through annual
principal payments and the interest rate on the related organization debt does not exceed three
percentage points above the posted yield for standard conventional fixed rate mortgages of the
Federal Home Loan Mortgage Corporation for delivery in 60 days in effect on the day of sale.
If at any time, the seller forgives the related organization debt allowed under this paragraph for
other than equal amount of payment on that debt, then the buyer shall pay to the state the total
revenue received by the nursing facility after the sale attributable to the amount of allowable debt
which has been forgiven. Any assignment, sale, or transfer of the debt instrument entered into
by the close relatives, either directly or indirectly, which grants to the close relative buyer the
right to receive all or a portion of the payments under the debt instrument shall, effective on
the date of the transfer, result in the prospective reduction in the corresponding portion of the
allowable debt and interest expense. Upon the death of the close relative seller, any remaining
balance of the close relative debt must be refinanced and such refinancing shall be subject to the
provisions of Minnesota Rules, part 9549.0060, subpart 7, item G. This paragraph shall not apply
to sales occurring on or after June 30, 1997.
(f) For purposes of this subdivision, "effective date of sale" means the later of either the date
on which legal title to the capital assets is transferred or the date on which closing for the sale
occurred.
(g) The effective day for the property-related payment rate determined under this subdivision
shall be the first day of the month following the month in which the effective date of sale occurs
or October 1, 1992, whichever is later, provided that the notice requirements under section
256B.47, subdivision 2, have been met.
(h) Notwithstanding Minnesota Rules, part 9549.0060, subparts 5, item A, subitems (3) and
(4), and 7, items E and F, the commissioner shall limit the total allowable debt and related interest
for sales occurring after June 30, 1992, to the sum of clauses (1) to (3):
(1) the historical cost of capital assets, as of the nursing facility's most recent previous
effective date of sale or, if there has been no previous sale, the nursing facility's initial historical
cost of constructing capital assets;
(2) the average annual capital asset additions after deduction for capital asset deletions, not
including depreciations; and
(3) one-half of the allowed inflation on the nursing facility's capital assets. The commissioner
shall compute the allowed inflation as described in paragraph (i).
(i) For purposes of computing the amount of allowed inflation, the commissioner must
apply the following principles:
(1) the lesser of the Consumer Price Index for all urban consumers or the Dodge Construction
Systems Costs for Nursing Homes for any time periods during which both are available must
be used. If the Dodge Construction Systems Costs for Nursing Homes becomes unavailable, the
commissioner shall substitute the index in subdivision 3f, or such other index as the secretary of
the Centers for Medicare and Medicaid Services may designate;
(2) the amount of allowed inflation to be applied to the capital assets in paragraph (h),
clauses (1) and (2), must be computed separately;
(3) the amount of allowed inflation must be determined on an annual basis, prorated on a
monthly basis for partial years and if the initial month of use is not determinable for a capital
asset, then one-half of that calendar year shall be used for purposes of prorating;
(4) the amount of allowed inflation to be applied to the capital assets in paragraph (h), clauses
(1) and (2), must not exceed 300 percent of the total capital assets in any one of those clauses; and
(5) the allowed inflation must be computed starting with the month following the nursing
facility's most recent previous effective date of sale or, if there has been no previous sale, the
month following the date of the nursing facility's initial occupancy, and ending with the month
preceding the effective date of sale.
(j) If the historical cost of a capital asset is not readily available for the date of the nursing
facility's most recent previous sale or if there has been no previous sale for the date of the
nursing facility's initial occupancy, then the commissioner shall limit the total allowable debt and
related interest after sale to the extent recognized by the Medicare intermediary after the sale.
For a nursing facility that has no historical capital asset cost data available and does not have
allowable debt and interest calculated by the Medicare intermediary, the commissioner shall use
the historical cost of capital asset data from the point in time for which capital asset data is
recorded in the nursing facility's audited financial statements.
(k) The limitations in this subdivision apply only to debt resulting from a sale of a nursing
facility occurring after June 30, 1992, including debt assumed by the purchaser of the nursing
facility.
    Subd. 15. Capital repair and replacement cost reporting and rate calculation. For rate
years beginning after June 30, 1993, a nursing facility's capital repair and replacement payment
rate shall be established annually as provided in paragraphs (a) to (e).
(a) Notwithstanding Minnesota Rules, part 9549.0060, subpart 12, the costs of any of the
following items not included in the equity incentive computations under subdivision 16 or
reported as a capital asset addition under subdivision 18, paragraph (b), including cash payment
for equity investment and principal and interest expense for debt financing, must be reported in
the capital repair and replacement cost category:
(1) wall coverings;
(2) paint;
(3) floor coverings;
(4) window coverings;
(5) roof repair; and
(6) window repair or replacement.
(b) Notwithstanding Minnesota Rules, part 9549.0060, subpart 12, the repair or replacement
of a capital asset not included in the equity incentive computations under subdivision 16 or
reported as a capital asset addition under subdivision 18, paragraph (b), must be reported
under this subdivision when the cost of the item exceeds $500, or in the plant operations and
maintenance cost category when the cost of the item is equal to or less than $500.
(c) To compute the capital repair and replacement payment rate, the allowable annual repair
and replacement costs for the reporting year must be divided by actual resident days for the
reporting year. The annual allowable capital repair and replacement costs shall not exceed $150
per licensed bed. The excess of the allowed capital repair and replacement costs over the capital
repair and replacement limit shall be a cost carryover to succeeding cost reporting periods, except
that sale of a facility, under subdivision 14, shall terminate the carryover of all costs except
those incurred in the most recent cost reporting year. The termination of the carryover shall have
effect on the capital repair and replacement rate on the same date as provided in subdivision 14,
paragraph (f), for the sale. For rate years beginning after June 30, 1994, the capital repair and
replacement limit shall be subject to the index provided in subdivision 3f, paragraph (a). For
purposes of this subdivision, the number of licensed beds shall be the number used to calculate
the nursing facility's capacity days. The capital repair and replacement rate must be added to the
nursing facility's total payment rate.
(d) Capital repair and replacement costs under this subdivision shall not be counted as either
care-related or other operating costs, nor subject to care-related or other operating limits.
(e) If costs otherwise allowable under this subdivision are incurred as the result of a project
approved under the moratorium exception process in section 144A.073, or in connection with an
addition to or replacement of buildings, attached fixtures, or land improvements for which the
total historical cost of these assets exceeds the lesser of $150,000 or ten percent of the nursing
facility's appraised value, these costs must be claimed under subdivision 16 or 17, as appropriate.
    Subd. 16. Major additions and replacements; equity incentive. For rate years beginning
after June 30, 1993, if a nursing facility acquires capital assets in connection with a project
approved under the moratorium exception process in section 144A.073 or in connection with an
addition to or replacement of buildings, attached fixtures, or land improvements for which the
total historical cost of those capital asset additions exceeds the lesser of $150,000 or ten percent
of the most recent appraised value, the nursing facility shall be eligible for an equity incentive
payment rate as in paragraphs (a) to (d). This computation is separate from the determination
of the nursing facility's rental rate. An equity incentive payment rate as computed under this
subdivision is limited to one in a 12-month period.
(a) An eligible nursing facility shall receive an equity incentive payment rate equal to the
allowable historical cost of the capital asset acquired, minus the allowable debt directly identified
to that capital asset, multiplied by the equity incentive factor as described in paragraphs (b) and
(c), and divided by the nursing facility's occupancy factor under subdivision 3f, paragraph (c).
This amount shall be added to the nursing facility's total payment rate and shall be effective the
same day as the incremental increase in paragraph (d) or subdivision 17. The allowable historical
cost of the capital assets and the allowable debt shall be determined as provided in Minnesota
Rules, parts 9549.0010 to 9549.0080, and this section.
(b) The equity incentive factor shall be determined under clauses (1) to (4):
(1) divide the initial allowable debt in paragraph (a) by the initial historical cost of the capital
asset additions referred to in paragraph (a), then cube the quotient,
(2) subtract the amount calculated in clause (1) from the number one,
(3) determine the difference between the rental factor and the lesser of two percentage points
above the posted yield for standard conventional fixed rate mortgages of the Federal Home Loan
Mortgage Corporation as published in the Wall Street Journal and in effect on the first day of the
month the debt or cost is incurred, or 16 percent,
(4) multiply the amount calculated in clause (2) by the amount calculated in clause (3).
(c) The equity incentive payment rate shall be limited to the term of the allowable debt in
paragraph (a), not greater than 20 years nor less than ten years. If no debt is incurred in acquiring
the capital asset, the equity incentive payment rate shall be paid for ten years. The sale of a
nursing facility under subdivision 14 shall terminate application of the equity incentive payment
rate effective on the date provided in subdivision 14, paragraph (f), for the sale.
(d) A nursing facility with an addition to or a renovation of its buildings, attached fixtures, or
land improvements meeting the criteria in this subdivision and not receiving the property-related
payment rate adjustment in subdivision 17, shall receive the incremental increase in the nursing
facility's rental rate as determined under Minnesota Rules, parts 9549.0010 to 9549.0080, and this
section. The incremental increase shall be added to the nursing facility's property-related payment
rate. The effective date of this incremental increase shall be the first day of the month following
the month in which the addition or replacement is completed.
    Subd. 17. Special provisions for moratorium exceptions. Notwithstanding Minnesota
Rules, part 9549.0060, subpart 3, for rate periods beginning on October 1, 1992, and for rate years
beginning after June 30, 1993, a nursing facility that (1) has completed a construction project
approved under section 144A.071, subdivision 4a, clause (m); (2) has completed a construction
project approved under section 144A.071, subdivision 4a, and effective after June 30, 1995; (3)
has completed a construction project approved under section 144A.071, subdivision 4c; or (4)
has completed a renovation, replacement, or upgrading project approved under the moratorium
exception process in section 144A.073 shall be reimbursed for costs directly identified to that
project as provided in subdivision 16 and subdivisions 17 to 17f.
    Subd. 17a. Allowable interest expense. (a) Notwithstanding Minnesota Rules, part
9549.0060, subparts 5, item A, subitems (1) and (3), and 7, item D, allowable interest expense
on debt shall include:
    (1) interest expense on debt related to the cost of purchasing or replacing depreciable
equipment, excluding vehicles, not to exceed ten percent of the total historical cost of the project;
and
    (2) interest expense on debt related to financing or refinancing costs, including costs related
to points, loan origination fees, financing charges, legal fees, and title searches; and issuance costs
including bond discounts, bond counsel, underwriter's counsel, corporate counsel, printing, and
financial forecasts. Allowable debt related to items in this clause shall not exceed seven percent
of the total historical cost of the project. To the extent these costs are financed, the straight-line
amortization of the costs in this clause is not an allowable cost; and
    (3) interest on debt incurred for the establishment of a debt reserve fund, net of the interest
earned on the debt reserve fund.
    (b) Debt incurred for costs under paragraph (a) is not subject to Minnesota Rules, part
9549.0060, subpart 5, item A, subitem (5) or (6).
    Subd. 17b. Property-related payment rate. The incremental increase in a nursing facility's
rental rate, determined under Minnesota Rules, parts 9549.0010 to 9549.0080, and this section,
resulting from the acquisition of allowable capital assets, and allowable debt and interest expense
under this subdivision shall be added to its property-related payment rate and shall be effective on
the first day of the month following the month in which the moratorium project was completed.
    Subd. 17c. Replacement-costs-new per bed limit. Notwithstanding subdivision 3f,
paragraph (a), for rate periods beginning on October 1, 1992, and for rate years beginning after
June 30, 1993, the replacement-costs-new per bed limit to be used in Minnesota Rules, part
9549.0060, subpart 4, item B, for a nursing facility that has completed a renovation, replacement,
or upgrading project that has been approved under the moratorium exception process in section
144A.073, or that has completed an addition to or replacement of buildings, attached fixtures, or
land improvements for which the total historical cost exceeds the lesser of $150,000 or ten percent
of the most recent appraised value, must be $47,500 per licensed bed in multiple-bed rooms and
$71,250 per licensed bed in a single-bed room. These amounts must be adjusted annually as
specified in subdivision 3f, paragraph (a), beginning January 1, 1993.
    Subd. 17d. Determination of rental per diem for total replacement projects. (a) For
purposes of this subdivision, a total replacement means the complete replacement of the nursing
facility's physical plant through the construction of a new physical plant, the transfer of the
nursing facility's license from one physical plant location to another, or a new building addition to
relocate beds from three- and four-bed wards. For total replacement projects completed on or after
July 1, 1992, the commissioner shall compute the incremental change in the nursing facility's
rental per diem, for rate years beginning on or after July 1, 1995, by replacing its appraised value,
including the historical capital asset costs, and the capital debt and interest costs with the new
nursing facility's allowable capital asset costs and the related allowable capital debt and interest
costs. If the new nursing facility has decreased its licensed capacity, the aggregate investment per
bed limit in subdivision 3a, paragraph (c), shall apply.
(b) If the new nursing facility has retained a portion of the original physical plant for nursing
facility usage, then a portion of the appraised value prior to the replacement must be retained
and included in the calculation of the incremental change in the nursing facility's rental per
diem. For purposes of this subdivision, the original nursing facility means the nursing facility
prior to the total replacement project. The portion of the appraised value to be retained shall
be calculated according to clauses (1) to (3):
(1) The numerator of the allocation ratio shall be the square footage of the area in the original
physical plant which is being retained for nursing facility usage.
(2) The denominator of the allocation ratio shall be the total square footage of the original
nursing facility physical plant.
(3) Each component of the nursing facility's allowable appraised value prior to the total
replacement project shall be multiplied by the allocation ratio developed by dividing clause
(1) by clause (2).
(c) In the case of either type of total replacement as authorized under section 144A.071 or
144A.073, the provisions of subdivisions 17 to 17f shall also apply.
(d) For purposes of the moratorium exception authorized under section 144A.071,
subdivision 4a , paragraph (s), if the total replacement involves the renovation and use of an
existing health care facility physical plant, the new allowable capital asset costs and related
debt and interest costs shall include first the allowable capital asset costs and related debt and
interest costs of the renovation, to which shall be added the allowable capital asset costs of the
existing physical plant prior to the renovation, and if reported by the facility, the related allowable
capital debt and interest costs.
    Subd. 17e. Replacement-costs-new per bed limit effective October 1, 2007.
    Notwithstanding Minnesota Rules, part 9549.0060, subpart 11, item C, subitem (2), for a total
replacement, as defined in subdivision 17d, authorized under section 144A.071 or 144A.073 after
July 1, 1999, any building project that is a relocation, renovation, upgrading, or conversion
completed on or after July 1, 2001, or any building project eligible for reimbursement under
section 256B.434, subdivision 4f, the replacement-costs-new per bed limit shall be $74,280 per
licensed bed in multiple-bed rooms, $92,850 per licensed bed in semiprivate rooms with a fixed
partition separating the resident beds, and $111,420 per licensed bed in single rooms. Minnesota
Rules, part 9549.0060, subpart 11, item C, subitem (2), does not apply. These amounts must be
adjusted annually as specified in subdivision 3f, paragraph (a), beginning January 1, 2000.
    Subd. 17f. Provisions for specific facilities. (a) For a total replacement, as defined in
subdivision 17d, authorized under section 144A.073 for a 96-bed nursing home in Carlton County,
the replacement-costs-new per bed limit shall be $74,280 per licensed bed in multiple-bed rooms,
$92,850 per licensed bed in semiprivate rooms with a fixed partition separating the resident's
beds, and $111,420 per licensed bed in a single room. Minnesota Rules, part 9549.0060, subpart
11, item C, subitem (2), does not apply. The resulting maximum allowable replacement-costs-new
multiplied by 1.25 shall constitute the project's dollar threshold for purposes of application of the
limit set forth in section 144A.071, subdivision 2. The commissioner of health may waive the
requirements of section 144A.073, subdivision 3b, paragraph (b), clause (2), on the condition that
the other requirements of that paragraph are met.
(b) For a renovation authorized under section 144A.073 for a 65-bed nursing home in St.
Louis County, the incremental increase in rental rate for purposes of subdivision 17b shall be
$8.16, and the total replacement cost, allowable appraised value, allowable debt, and allowable
interest shall be increased according to the incremental increase.
(c) For a total replacement, as defined in subdivision 17d, authorized under section 144A.073
involving a new building addition that relocates beds from three-bed wards for an 80-bed nursing
home in Redwood County, the replacement-costs-new per bed limit shall be $74,280 per licensed
bed for multiple-bed rooms; $92,850 per licensed bed for semiprivate rooms with a fixed partition
separating the beds; and $111,420 per licensed bed for single rooms. These amounts shall be
adjusted annually, beginning January 1, 2001. Minnesota Rules, part 9549.0060, subpart 11,
item C, subitem (2), does not apply. The resulting maximum allowable replacement-costs-new
multiplied by 1.25 shall constitute the project's dollar threshold for purposes of application of the
limit set forth in section 144A.071, subdivision 2. The commissioner of health may waive the
requirements of section 144A.073, subdivision 3b, paragraph (b), clause (2), on the condition that
the other requirements of that paragraph are met.
    Subd. 18. Updating appraisals, additions, and replacements. (a) Notwithstanding
Minnesota Rules, part 9549.0060, subparts 1 to 3, the appraised value, routine updating of the
appraised value, and special reappraisals are subject to this subdivision.
For all rate years after June 30, 1993, the commissioner shall no longer conduct any
appraisals under Minnesota Rules, part 9549.0060, for the purpose of determining property-related
payment rates.
(b) Notwithstanding Minnesota Rules, part 9549.0060, subpart 2, for rate years beginning
after June 30, 1993, the commissioner shall routinely update the appraised value of each nursing
facility by adding the cost of capital asset acquisitions to its allowable appraised value.
The commissioner shall also annually index each nursing facility's allowable appraised value
by the inflation index referenced in subdivision 3f, paragraph (a), for the purpose of computing
the nursing facility's annual rental rate. In annually adjusting the nursing facility's appraised
value, the commissioner must not include the historical cost of capital assets acquired during the
reporting year in the nursing facility's appraised value.
In addition, the nursing facility's appraised value must be reduced by the historical cost of
capital asset disposals or applicable credits such as public grants and insurance proceeds. Capital
asset additions and disposals must be reported on the nursing facility's annual cost report in the
reporting year of acquisition or disposal. The incremental increase in the nursing facility's rental
rate resulting from this annual adjustment as determined under Minnesota Rules, parts 9549.0010
to 9549.0080, and this section shall be added to the nursing facility's property-related payment
rate for the rate year following the reporting year.
    Subd. 19. Refinancing incentive. (a) A nursing facility that refinances debt after May 30,
1992, in order to save in interest expense payments as determined in clauses (1) to (5) may be
eligible for the refinancing incentive under this subdivision. To be eligible for the refinancing
incentive, a nursing facility must notify the commissioner in writing of such a refinancing within
60 days following the date on which the refinancing occurs. If the nursing facility meets these
conditions, the commissioner shall determine the refinancing incentive as in clauses (1) to (5).
(1) Compute the aggregate amount of interest expense, including amortized issuance and
financing costs, remaining on the debt to be refinanced, and divide this amount by the number
of years remaining for the term of that debt.
(2) Compute the aggregate amount of interest expense, including amortized issuance and
financing costs, for the new debt, and divide this amount by the number of years for the term of
that debt.
(3) Subtract the amount in clause (2) from the amount in clause (1), and multiply the
amount, if positive, by .5.
(4) The amount in clause (3) shall be divided by the nursing facility's occupancy factor
under subdivision 3f, paragraph (c).
(5) The per diem amount in clause (4) shall be deducted from the nursing facility's
property-related payment rate for three full rate years following the rate year in which the
refinancing occurs. For the fourth full rate year following the rate year in which the refinancing
occurs, and each rate year thereafter, the per diem amount in clause (4) shall again be deducted
from the nursing facility's property-related payment rate.
(b) An increase in a nursing facility's debt for costs in subdivision 17, paragraph (b),
clause (2), including the cost of refinancing the issuance or financing costs of the debt
refinanced resulting from refinancing that meets the conditions of this section shall be allowed,
notwithstanding Minnesota Rules, part 9549.0060, subpart 5, item A, subitem (6).
(c) The proceeds of refinancing may not be used for the purpose of withdrawing equity from
the nursing facility.
(d) Sale of a nursing facility under subdivision 14 shall terminate the payment of the incentive
payments under this subdivision effective the date provided in subdivision 14, paragraph (f), for
the sale, and the full amount of the refinancing incentive in paragraph (a) shall be implemented.
(e) If a nursing facility eligible under this subdivision fails to notify the commissioner
as required, the commissioner shall determine the full amount of the refinancing incentive in
paragraph (a), and shall deduct one-half that amount from the nursing facility's property-related
payment rate effective the first day of the month following the month in which the refinancing
is completed. For the next three full rate years, the commissioner shall deduct one-half the
amount in paragraph (a), clause (5). The remaining per diem amount shall be deducted in each
rate year thereafter.
(f) The commissioner shall reestablish the nursing facility's rental rate under Minnesota
Rules, parts 9549.0010 to 9549.0080, and this section following the refinancing using the new debt
and interest expense information for the purpose of measuring future incremental rental increases.
    Subd. 20. Special property rate setting. For rate periods beginning on October 1, 1992,
and for rate years beginning after June 30, 1993, the property-related payment rate for a nursing
facility approved for total replacement under the moratorium exception process in section
144A.073 through an addition to another nursing facility shall have its property-related rate under
subdivision 13 recalculated using the greater of actual resident days or 80 percent of capacity
days. This rate shall apply until the nursing facility is replaced or until the moratorium exception
authority lapses, whichever is sooner.
    Subd. 21. Indexing thresholds. Beginning January 1, 1993, and each January 1 thereafter,
the commissioner shall annually update the dollar thresholds in subdivisions 15, paragraph (e),
16, and 17, and in section 144A.071, subdivisions 2 and 4a, clauses (b) and (e), by the inflation
index referenced in subdivision 3f, paragraph (a).
    Subd. 22. Changes to nursing facility reimbursement. The nursing facility reimbursement
changes in paragraphs (a) to (d) apply to Minnesota Rules, parts 9549.0010 to 9549.0080, and
this section, and are effective for rate years beginning on or after July 1, 1993, unless otherwise
indicated.
(a) In addition to the approved pension or profit sharing plans allowed by the reimbursement
rule, the commissioner shall allow those plans specified in Internal Revenue Code, sections
403(b) and 408(k).
(b) The commissioner shall allow as workers' compensation insurance costs under section
256B.421, subdivision 14, the costs of workers' compensation coverage obtained under the
following conditions:
(1) a plan approved by the commissioner of commerce as a Minnesota group or individual
self-insurance plan as provided in section 79A.03;
(2) a plan in which:
(i) the nursing facility, directly or indirectly, purchases workers' compensation coverage in
compliance with section 176.181, subdivision 2, from an authorized insurance carrier;
(ii) a related organization to the nursing facility reinsures the workers' compensation
coverage purchased, directly or indirectly, by the nursing facility; and
(iii) all of the conditions in clause (4) are met;
(3) a plan in which:
(i) the nursing facility, directly or indirectly, purchases workers' compensation coverage in
compliance with section 176.181, subdivision 2, from an authorized insurance carrier;
(ii) the insurance premium is calculated retrospectively, including a maximum premium
limit, and paid using the paid loss retro method; and
(iii) all of the conditions in clause (4) are met;
(4) additional conditions are:
(i) the costs of the plan are allowable under the federal Medicare program;
(ii) the reserves for the plan are maintained in an account controlled and administered by a
person which is not a related organization to the nursing facility;
(iii) the reserves for the plan cannot be used, directly or indirectly, as collateral for debts
incurred or other obligations of the nursing facility or related organizations to the nursing facility;
(iv) if the plan provides workers' compensation coverage for non-Minnesota nursing
facilities, the plan's cost methodology must be consistent among all nursing facilities covered by
the plan, and if reasonable, is allowed notwithstanding any reimbursement laws regarding cost
allocation to the contrary;
(v) central, affiliated, corporate, or nursing facility costs related to their administration of
the plan are costs which must remain in the nursing facility's administrative cost category and
must not be allocated to other cost categories;
(vi) required security deposits, whether in the form of cash, investments, securities, assets,
letters of credit, or in any other form are not allowable costs for purposes of establishing the
facilities payment rate; and
(vii) for the rate year beginning on July 1, 1998, a group of nursing facilities related by
common ownership that self-insures workers' compensation may allocate its directly identified
costs of self-insuring its Minnesota nursing facility workers among those nursing facilities in the
group that are reimbursed under this section or section 256B.434. The method of cost allocation
shall be based on the ratio of each nursing facility's total allowable salaries and wages to that of
the nursing facility group's total allowable salaries and wages, then similarly allocated within
each nursing facility's operating cost categories. The costs associated with the administration of
the group's self-insurance plan must remain classified in the nursing facility's administrative cost
category. A written request of the nursing facility group's election to use this alternate method
of allocation of self-insurance costs must be received by the commissioner no later than May 1,
1998, to take effect July 1, 1998, or such costs shall continue to be allocated under the existing
cost allocation methods. Once a nursing facility group elects this method of cost allocation for its
workers' compensation self-insurance costs, it shall remain in effect until such time as the group
no longer self-insures these costs;
(5) any costs allowed pursuant to clauses (1) to (3) are subject to the following requirements:
(i) if the nursing facility is sold or otherwise ceases operations, the plan's reserves must be
subject to an actuarially based settle-up after 36 months from the date of sale or the date on which
operations ceased. The facility's medical assistance portion of the total excess plan reserves
must be paid to the state within 30 days following the date on which excess plan reserves are
determined;
(ii) any distribution of excess plan reserves made to or withdrawals made by the nursing
facility or a related organization are applicable credits and must be used to reduce the nursing
facility's workers' compensation insurance costs in the reporting period in which a distribution
or withdrawal is received;
(iii) if reimbursement for the plan is sought under the federal Medicare program, and is
audited pursuant to the Medicare program, the nursing facility must provide a copy of Medicare's
final audit report, including attachments and exhibits, to the commissioner within 30 days of
receipt by the nursing facility or any related organization. The commissioner shall implement
the audit findings associated with the plan upon receipt of Medicare's final audit report. The
department's authority to implement the audit findings is independent of its authority to conduct a
field audit.
(c) In the determination of incremental increases in the nursing facility's rental rate as
required in subdivisions 14 to 21, except for a refinancing permitted under subdivision 19, the
commissioner must adjust the nursing facility's property-related payment rate for both incremental
increases and decreases in recomputations of its rental rate;
(d) A nursing facility's administrative cost limitation must be modified as follows:
(1) if the nursing facility's licensed beds exceed 195 licensed beds, the general and
administrative cost category limitation shall be 13 percent;
(2) if the nursing facility's licensed beds are more than 150 licensed beds, but less than 196
licensed beds, the general and administrative cost category limitation shall be 14 percent; or
(3) if the nursing facility's licensed beds is less than 151 licensed beds, the general and
administrative cost category limitation shall remain at 15 percent.
(e) For the rate year beginning on July 1, 1998, a group of nursing facilities related by
common ownership that self-insures group health, dental, or life insurance may allocate its directly
identified costs of self-insuring its Minnesota nursing facility workers among those nursing
facilities in the group that are reimbursed under this section or section 256B.434. The method of
cost allocation shall be based on the ratio of each nursing facility's total allowable salaries and
wages to that of the nursing facility group's total allowable salaries and wages, then similarly
allocated within each nursing facility's operating cost categories. The costs associated with the
administration of the group's self-insurance plan must remain classified in the nursing facility's
administrative cost category. A written request of the nursing facility group's election to use this
alternate method of allocation of self-insurance costs must be received by the commissioner no
later than May 1, 1998, to take effect July 1, 1998, or those self-insurance costs shall continue to
be allocated under the existing cost allocation methods. Once a nursing facility group elects this
method of cost allocation for its group health, dental, or life insurance self-insurance costs, it shall
remain in effect until such time as the group no longer self-insures these costs.
    Subd. 23. County nursing home payment adjustments. (a) Beginning in 1994, the
commissioner shall pay a nursing home payment adjustment on May 31 after noon to a county
in which is located a nursing home that, on that date, was county-owned and operated, with the
county named as licensee by the commissioner of health, and had over 40 beds and medical
assistance occupancy in excess of 50 percent during the reporting year ending September 30,
1991. The adjustment shall be an amount equal to $16 per calendar day multiplied by the number
of beds licensed in the facility on that date.
(b) Payments under paragraph (a) are excluded from medical assistance per diem rate
calculations. These payments are required notwithstanding any rule prohibiting medical assistance
payments from exceeding payments from private pay residents. A facility receiving a payment
under paragraph (a) may not increase charges to private pay residents by an amount equivalent to
the per diem amount payments under paragraph (a) would equal if converted to a per diem.
(c) Beginning in 2002, in addition to any payment under paragraph (a), the commissioner
shall pay to a nursing facility described in paragraph (a) an adjustment in an amount equal to
$29.55 per calendar day multiplied by the number of beds licensed in the facility on that date. The
provisions of paragraphs (a) and (b) apply to payments under this paragraph.
(d) Beginning in 2003, in addition to any payment under paragraphs (a) and (c), the
commissioner shall pay to a nursing facility described in paragraph (a) an adjustment in an
amount equal to $6.11 per calendar day multiplied by the number of beds licensed in the facility
on that date. The provisions of paragraphs (a) and (b) apply to payments under this paragraph.
(e) The commissioner may reduce payments under paragraphs (c) and (d) based on the
commissioner's determination of Medicare upper payment limits. Any adjustments must be
proportional to adjustments made under section 256B.19, subdivision 1d, paragraph (e).
    Subd. 24.[Repealed, 2000 c 449 s 15]
    Subd. 25. Changes to nursing facility reimbursement beginning July 1, 1995. A nursing
facility licensed for 302 beds on September 30, 1993, that was approved under the moratorium
exception process in section 144A.073 for a partial replacement, and completed the replacement
project in December 1994, is exempt from Minnesota Statutes 1998, section 256B.431,
subdivision 25 , paragraphs (b) to (d) for rate years beginning on or after July 1, 1995.
For the rate year beginning July 1, 1997, after computing this nursing facility's payment rate
according to section 256B.434, the commissioner shall make a one-year rate adjustment of $8.62
to the facility's contract payment rate for the rate effect of operating cost changes associated
with the facility's 1994 downsizing project.
For rate years beginning on or after July 1, 1997, the commissioner shall add 35 cents to the
facility's base property related payment rate for the rate effect of reducing its licensed capacity
to 290 beds from 302 beds and shall add 83 cents to the facility's real estate tax and special
assessment payment rate for payments in lieu of real estate taxes. The adjustments in this clause
shall remain in effect for the duration of the facility's contract under section 256B.434.
    Subd. 26. Changes to nursing facility reimbursement beginning July 1, 1997. The nursing
facility reimbursement changes in paragraphs (a) to (e) shall apply in the sequence specified in
Minnesota Rules, parts 9549.0010 to 9549.0080, and this section, beginning July 1, 1997.
(a) For rate years beginning on or after July 1, 1997, the commissioner shall limit a nursing
facility's allowable operating per diem for each case mix category for each rate year. The
commissioner shall group nursing facilities into two groups, freestanding and nonfreestanding,
within each geographic group, using their operating cost per diem for the case mix A
classification. A nonfreestanding nursing facility is a nursing facility whose other operating cost
per diem is subject to the hospital attached, short length of stay, or the rule 80 limits. All other
nursing facilities shall be considered freestanding nursing facilities. The commissioner shall then
array all nursing facilities in each grouping by their allowable case mix A operating cost per diem.
In calculating a nursing facility's operating cost per diem for this purpose, the commissioner
shall exclude the raw food cost per diem related to providing special diets that are based on
religious beliefs, as determined in subdivision 2b, paragraph (h). For those nursing facilities in
each grouping whose case mix A operating cost per diem:
(1) is at or below the median of the array, the commissioner shall limit the nursing facility's
allowable operating cost per diem for each case mix category to the lesser of the prior reporting
year's allowable operating cost per diem as specified in Laws 1996, chapter 451, article 3, section
11, paragraph (h), plus the inflation factor as established in paragraph (d), clause (2), increased
by two percentage points, or the current reporting year's corresponding allowable operating
cost per diem; or
(2) is above the median of the array, the commissioner shall limit the nursing facility's
allowable operating cost per diem for each case mix category to the lesser of the prior reporting
year's allowable operating cost per diem as specified in Laws 1996, chapter 451, article 3, section
11, paragraph (h), plus the inflation factor as established in paragraph (d), clause (2), increased
by one percentage point, or the current reporting year's corresponding allowable operating cost
per diem.
For purposes of paragraph (a), if a nursing facility reports on its cost report a reduction in
cost due to a refund or credit for a rate year beginning on or after July 1, 1998, the commissioner
shall increase that facility's spend-up limit for the rate year following the current rate year by the
amount of the cost reduction divided by its resident days for the reporting year preceding the rate
year in which the adjustment is to be made.
(b) For rate years beginning on or after July 1, 1997, the commissioner shall limit the
allowable operating cost per diem for high cost nursing facilities. After application of the limits in
paragraph (a) to each nursing facility's operating cost per diem, the commissioner shall group
nursing facilities into two groups, freestanding or nonfreestanding, within each geographic
group. A nonfreestanding nursing facility is a nursing facility whose other operating cost per
diem are subject to hospital attached, short length of stay, or rule 80 limits. All other nursing
facilities shall be considered freestanding nursing facilities. The commissioner shall then array all
nursing facilities within each grouping by their allowable case mix A operating cost per diem.
In calculating a nursing facility's operating cost per diem for this purpose, the commissioner
shall exclude the raw food cost per diem related to providing special diets that are based on
religious beliefs, as determined in subdivision 2b, paragraph (h). For those nursing facilities in
each grouping whose case mix A operating cost per diem exceeds 1.0 standard deviation above
the median, the commissioner shall reduce their allowable operating cost per diem by three
percent. For those nursing facilities in each grouping whose case mix A operating cost per diem
exceeds 0.5 standard deviation above the median but is less than or equal to 1.0 standard deviation
above the median, the commissioner shall reduce their allowable operating cost per diem by two
percent. However, in no case shall a nursing facility's operating cost per diem be reduced below
its grouping's limit established at 0.5 standard deviations above the median.
(c) For rate years beginning on or after July 1, 1997, the commissioner shall determine
a nursing facility's efficiency incentive by first computing the allowable difference, which is
the lesser of $4.50 or the amount by which the facility's other operating cost limit exceeds its
nonadjusted other operating cost per diem for that rate year. The commissioner shall compute
the efficiency incentive by:
(1) subtracting the allowable difference from $4.50 and dividing the result by $4.50;
(2) multiplying 0.20 by the ratio resulting from clause (1), and then;
(3) adding 0.50 to the result from clause (2); and
(4) multiplying the result from clause (3) times the allowable difference.
The nursing facility's efficiency incentive payment shall be the lesser of $2.25 or the product
obtained in clause (4).
(d) For rate years beginning on or after July 1, 1997, the forecasted price index for a nursing
facility's allowable operating cost per diem shall be determined under clauses (1) and (2) using the
change in the Consumer Price Index-All Items (United States city average) (CPI-U) as forecasted
by Data Resources, Inc. The commissioner shall use the indices as forecasted in the fourth quarter
of the calendar year preceding the rate year, subject to subdivision 2l, paragraph (c).
(1) The CPI-U forecasted index for allowable operating cost per diem shall be based on
the 21-month period from the midpoint of the nursing facility's reporting year to the midpoint
of the rate year following the reporting year.
(2) For rate years beginning on or after July 1, 1997, the forecasted index for operating cost
limits referred to in subdivision 21, paragraph (b), shall be based on the CPI-U for the 12-month
period between the midpoints of the two reporting years preceding the rate year.
(e) After applying these provisions for the respective rate years, the commissioner shall
index these allowable operating cost per diem by the inflation factor provided for in paragraph
(d), clause (1), and add the nursing facility's efficiency incentive as computed in paragraph (c).
(f) For the rate years beginning on July 1, 1997, July 1, 1998, and July 1, 1999, a
nursing facility licensed for 40 beds effective May 1, 1992, with a subsequent increase of 20
Medicare/Medicaid certified beds, effective January 26, 1993, in accordance with an increase in
licensure is exempt from paragraphs (a) and (b).
(g) For a nursing facility whose construction project was authorized according to section
144A.073, subdivision 5, paragraph (g), the operating cost payment rates for the new location
shall be determined based on Minnesota Rules, part 9549.0057. The relocation allowed under
section 144A.073, subdivision 5, paragraph (g), and the rate determination allowed under this
paragraph must meet the cost neutrality requirements of section 144A.073, subdivision 3c.
Paragraphs (a) and (b) shall not apply until the second rate year after the settle-up cost report is
filed. Notwithstanding subdivision 2b, paragraph (g), real estate taxes and special assessments
payable by the new location, a 501(c)(3) nonprofit corporation, shall be included in the payment
rates determined under this subdivision for all subsequent rate years.
(h) For the rate year beginning July 1, 1997, the commissioner shall compute the payment
rate for a nursing facility licensed for 94 beds on September 30, 1996, that applied in October
1993 for approval of a total replacement under the moratorium exception process in section
144A.073, and completed the approved replacement in June 1995, with other operating cost
spend-up limit under paragraph (a), increased by $3.98, and after computing the facility's payment
rate according to this section, the commissioner shall make a one-year positive rate adjustment of
$3.19 for operating costs related to the newly constructed total replacement, without application
of paragraphs (a) and (b). The facility's per diem, before the $3.19 adjustment, shall be used as
the prior reporting year's allowable operating cost per diem for payment rate calculation for the
rate year beginning July 1, 1998. A facility described in this paragraph is exempt from paragraph
(b) for the rate years beginning July 1, 1997, and July 1, 1998.
(i) For the purpose of applying the limit stated in paragraph (a), a nursing facility in
Kandiyohi County licensed for 86 beds that was granted hospital-attached status on December 1,
1994, shall have the prior year's allowable care-related per diem increased by $3.207 and the prior
year's other operating cost per diem increased by $4.777 before adding the inflation in paragraph
(d), clause (2), for the rate year beginning on July 1, 1997.
(j) For the purpose of applying the limit stated in paragraph (a), a 117 bed nursing facility
located in Pine County shall have the prior year's allowable other operating cost per diem
increased by $1.50 before adding the inflation in paragraph (d), clause (2), for the rate year
beginning on July 1, 1997.
(k) For the purpose of applying the limit under paragraph (a), a nursing facility in Hibbing
licensed for 192 beds shall have the prior year's allowable other operating cost per diem increased
by $2.67 before adding the inflation in paragraph (d), clause (2), for the rate year beginning
July 1, 1997.
    Subd. 27. Changes to nursing facility reimbursement beginning July 1, 1998. (a) For
the purpose of applying the limit stated in subdivision 26, paragraph (a), a nursing facility
in Hennepin County licensed for 181 beds on September 30, 1996, shall have the prior year's
allowable care-related per diem increased by $1.455 and the prior year's other operating cost per
diem increased by $0.439 before adding the inflation in subdivision 26, paragraph (d), clause (2),
for the rate year beginning on July 1, 1998.
(b) For the purpose of applying the limit stated in subdivision 26, paragraph (a), a nursing
facility in Hennepin County licensed for 161 beds on September 30, 1996, shall have the prior
year's allowable care-related per diem increased by $1.154 and the prior year's other operating
cost per diem increased by $0.256 before adding the inflation in subdivision 26, paragraph (d),
clause (2), for the rate year beginning on July 1, 1998.
(c) For the purpose of applying the limit stated in subdivision 26, paragraph (a), a nursing
facility in Ramsey County licensed for 176 beds on September 30, 1996, shall have the prior
year's allowable care-related per diem increased by $0.803 and the prior year's other operating
cost per diem increased by $0.272 before adding the inflation in subdivision 26, paragraph (d),
clause (2), for the rate year beginning on July 1, 1998.
(d) For the purpose of applying the limit stated in subdivision 26, paragraph (a), a nursing
facility in Brown County licensed for 86 beds on September 30, 1996, shall have the prior year's
allowable care-related per diem increased by $0.850 and the prior year's other operating cost per
diem increased by $0.275 before adding the inflation in subdivision 26, paragraph (d), clause (2),
for the rate year beginning on July 1, 1998.
(e) For the rate year beginning July 1, 1998, the commissioner shall compute the payment
rate for a nursing facility, which was licensed for 110 beds on May 1, 1997, was granted approval
in January 1994 for a replacement and remodeling project under the moratorium exception
process in section 144A.073, and completed the approved replacement and remodeling project
on March 14, 1997, by increasing the other operating cost spend-up limit under paragraph (a)
by $1.64. After computing the facility's payment rate for the rate year beginning July 1, 1998,
according to this section, the commissioner shall make a one-year positive rate adjustment of
48 cents for increased real estate taxes resulting from completion of the moratorium exception
project, without application of paragraphs (a) and (b).
(f) For the rate year beginning July 1, 1998, the commissioner shall compute the payment
rate for a nursing facility exempted from care-related limits under subdivision 2b, paragraph (d),
clause (2), with a minimum of three-quarters of its beds licensed to provide residential services
for the physically disabled under Minnesota Rules, parts 9570.2000 to 9570.3400, with the
care-related spend-up limit under subdivision 26, paragraph (a), increased by $13.21 for the rate
year beginning July 1, 1998, without application of subdivision 26, paragraph (b). For rate years
beginning on or after July 1, 1999, the commissioner shall exclude that amount in calculating the
facility's operating cost per diem for purposes of applying subdivision 26, paragraph (b).
(g) For the rate year beginning July 1, 1998, a nursing facility in Canby, Minnesota, licensed
for 75 beds shall be reimbursed without the limitation imposed under subdivision 26, paragraph
(a), and for rate years beginning on or after July 1, 1999, its base costs shall be calculated on the
basis of its September 30, 1997, cost report.
(h) The nursing facility reimbursement changes in paragraphs (i) and (j) shall apply in the
sequence specified in this section and Minnesota Rules, parts 9549.0010 to 9549.0080, beginning
July 1, 1998.
(i) For rate years beginning on or after July 1, 1998, the operating cost limits established in
subdivisions 2, 2b, 2i, 3c, and 22, paragraph (d), and any previously effective corresponding limits
in law or rule shall not apply, except that these cost limits shall still be calculated for purposes of
determining efficiency incentive per diems. For rate years beginning on or after July 1, 1998, the
total operating cost payment rates for a nursing facility shall be the greater of the total operating
cost payment rates determined under this section or the total operating cost payment rates in effect
on June 30, 1998, subject to rate adjustments due to field audit or rate appeal resolution.
(j) For rate years beginning on or after July 1, 1998, the operating cost per diem referred
to in subdivision 26, paragraph (a), clauses (1) and (2), is the sum of the care-related and other
operating per diems for a given case mix class. Any reductions to the combined operating per
diem shall be divided proportionately between the care-related and other operating per diems.
(k) For rate years beginning on or after July 1, 1998, the commissioner shall modify the
determination of the spend-up limits referred to in subdivision 26, paragraph (a), by indexing each
group's previous year's median value by the factor in subdivision 26, paragraph (d), clause (2),
plus one percentage point.
(l) For rate years beginning on or after July 1, 1998, the commissioner shall modify the
determination of the high cost limits referred to in subdivision 26, paragraph (b), by indexing
each group's previous year's high cost per diem limits at .5 and one standard deviations above the
median by the factor in subdivision 26, paragraph (d), clause (2), plus one percentage point.
    Subd. 28. Nursing facility rate increases beginning July 1, 1999, and July 1, 2000. (a) For
the rate years beginning July 1, 1999, and July 1, 2000, the commissioner shall make available to
each nursing facility reimbursed under this section or section 256B.434 an adjustment to the total
operating payment rate. For nursing facilities reimbursed under this section or section 256B.434,
the July 1, 2000, operating payment rate increases provided in this subdivision shall be applied to
each facility's June 30, 2000, operating payment rate. For each facility, total operating costs shall
be separated into costs that are compensation related and all other costs. Compensation-related
costs include salaries, payroll taxes, and fringe benefits for all employees except management
fees, the administrator, and central office staff.
(b) For the rate year beginning July 1, 1999, the commissioner shall make available a rate
increase for compensation-related costs of 4.843 percent and a rate increase for all other operating
costs of 3.446 percent.
(c) For the rate year beginning July 1, 2000, the commissioner shall make available:
(1) a rate increase for compensation-related costs of 3.632 percent;
(2) an additional rate increase for each case mix payment rate which must be used to increase
the per-hour pay rate of all employees except management fees, the administrator, and central
office staff by an equal dollar amount and to pay associated costs for FICA, the Medicare tax,
workers' compensation premiums, and federal and state unemployment insurance, to be calculated
according to clauses (i) to (iii):
(i) the commissioner shall calculate the arithmetic mean of the 11 June 30, 2000, operating
rates for each facility;
(ii) the commissioner shall construct an array of nursing facilities from highest to lowest,
according to the arithmetic mean calculated in clause (i). A numerical rank shall be assigned to
each facility in the array. The facility with the highest mean shall be assigned a numerical rank
of one. The facility with the lowest mean shall be assigned a numerical rank equal to the total
number of nursing facilities in the array. All other facilities shall be assigned a numerical rank in
accordance with their position in the array;
(iii) the amount of the additional rate increase shall be $1 plus an amount equal to $3.13
multiplied by the ratio of the facility's numeric rank divided by the number of facilities in the
array; and
(3) a rate increase for all other operating costs of 2.585 percent.
Money received by a facility as a result of the additional rate increase provided under clause
(2) shall be used only for wage increases implemented on or after July 1, 2000, and shall not be
used for wage increases implemented prior to that date.
(d) The payment rate adjustment for each nursing facility must be determined under clause
(1) or (2):
(1) for each nursing facility that reports salaries for registered nurses, licensed practical
nurses, aides, orderlies, and attendants separately, the commissioner shall determine the payment
rate adjustment using the categories specified in paragraph (a) multiplied by the rate increases
specified in paragraph (b) or (c), and then dividing the resulting amount by the nursing facility's
actual resident days. In determining the amount of a payment rate adjustment for a nursing facility
reimbursed under section 256B.434, the commissioner shall determine the proportions of the
facility's rates that are compensation-related costs and all other operating costs based on the
facility's most recent cost report; and
(2) for each nursing facility that does not report salaries for registered nurses, licensed
practical nurses, aides, orderlies, and attendants separately, the payment rate adjustment shall
be computed using the facility's total operating costs, separated into the categories specified in
paragraph (a) in proportion to the weighted average of all facilities determined under clause (1),
multiplied by the rate increases specified in paragraph (b) or (c), and then dividing the resulting
amount by the nursing facility's actual resident days.
(e) A nursing facility may apply for the compensation-related payment rate adjustment
calculated under this subdivision. The application must be made to the commissioner and contain
a plan by which the nursing facility will distribute the compensation-related portion of the
payment rate adjustment to employees of the nursing facility. For nursing facilities in which the
employees are represented by an exclusive bargaining representative, an agreement negotiated and
agreed to by the employer and the exclusive bargaining representative constitutes the plan. For the
second rate year, a negotiated agreement constitutes the plan only if the agreement is finalized
after the date of enactment of all rate increases for the second rate year. The commissioner
shall review the plan to ensure that the payment rate adjustment per diem is used as provided
in paragraphs (a) to (c). To be eligible, a facility must submit its plan for the compensation
distribution by December 31 each year. A facility may amend its plan for the second rate year by
submitting a revised plan by December 31, 2000. If a facility's plan for compensation distribution
is effective for its employees after July 1 of the year that the funds are available, the payment rate
adjustment per diem shall be effective the same date as its plan.
(f) A copy of the approved distribution plan must be made available to all employees. This
must be done by giving each employee a copy or by posting it in an area of the nursing facility to
which all employees have access. If an employee does not receive the compensation adjustment
described in their facility's approved plan and is unable to resolve the problem with the facility's
management or through the employee's union representative, the employee may contact the
commissioner at an address or phone number provided by the commissioner and included in the
approved plan.
(g) If the reimbursement system under section 256B.435 is not implemented until July 1,
2001, the salary adjustment per diem authorized in subdivision 2i, paragraph (c), shall continue
until June 30, 2001.
(h) For the rate year beginning July 1, 1999, the following nursing facilities shall be allowed
a rate increase equal to 67 percent of the rate increase that would be allowed if subdivision
26, paragraph (a), was not applied:
(1) a nursing facility in Carver County licensed for 33 nursing home beds and four boarding
care beds;
(2) a nursing facility in Faribault County licensed for 159 nursing home beds on September
30, 1998; and
(3) a nursing facility in Houston County licensed for 68 nursing home beds on September
30, 1998.
(i) For the rate year beginning July 1, 1999, the following nursing facilities shall be allowed
a rate increase equal to 67 percent of the rate increase that would be allowed if subdivision
26, paragraphs (a) and (b), were not applied:
(1) a nursing facility in Chisago County licensed for 135 nursing home beds on September
30, 1998; and
(2) a nursing facility in Murray County licensed for 62 nursing home beds on September
30, 1998.
(j) For the rate year beginning July 1, 1999, a nursing facility in Hennepin County licensed
for 134 beds on September 30, 1998, shall:
(1) have the prior year's allowable care-related per diem increased by $3.93 and the prior
year's other operating cost per diem increased by $1.69 before adding the inflation in subdivision
26, paragraph (d), clause (2); and
(2) be allowed a rate increase equal to 67 percent of the rate increase that would be allowed
if subdivision 26, paragraphs (a) and (b), were not applied.
The increases provided in paragraphs (h), (i), and (j) shall be included in the facility's total
payment rates for the purposes of determining future rates under this section or any other section.
(k) For the rate years beginning on or after July 1, 2000, a nursing home facility in Goodhue
County that was licensed for 104 beds on February 1, 2000, shall have its employee pension
benefit costs reported on its Rule 50 cost report treated as PERA contributions for the purpose of
computing its payment rates.
    Subd. 29. Facility rate increases effective July 1, 2000. Following the determination
under subdivision 28 of the payment rate for the rate year beginning July 1, 2000, for a facility
in Roseau County licensed for 49 beds, the facility's operating cost per diem shall be increased
by the following amounts:
(1) case mix class A, $1.97;
(2) case mix class B, $2.11;
(3) case mix class C, $2.26;
(4) case mix class D, $2.39;
(5) case mix class E, $2.54;
(6) case mix class F, $2.55;
(7) case mix class G, $2.66;
(8) case mix class H, $2.90;
(9) case mix class I, $2.97;
(10) case mix class J, $3.10; and
(11) case mix class K, $3.36.
These increases shall be included in the facility's total payment rates for the purpose of
determining future rates under this section or any other section.
    Subd. 30. Bed layaway and delicensure. (a) For rate years beginning on or after July
1, 2000, a nursing facility reimbursed under this section which has placed beds on layaway
shall, for purposes of application of the downsizing incentive in subdivision 3a, paragraph (c),
and calculation of the rental per diem, have those beds given the same effect as if the beds had
been delicensed so long as the beds remain on layaway. At the time of a layaway, a facility may
change its single bed election for use in calculating capacity days under Minnesota Rules, part
9549.0060, subpart 11. The property payment rate increase shall be effective the first day of the
month following the month in which the layaway of the beds becomes effective under section
144A.071, subdivision 4b.
(b) For rate years beginning on or after July 1, 2000, notwithstanding any provision to the
contrary under section 256B.434, a nursing facility reimbursed under that section which has
placed beds on layaway shall, for so long as the beds remain on layaway, be allowed to:
(1) aggregate the applicable investment per bed limits based on the number of beds licensed
immediately prior to entering the alternative payment system;
(2) retain or change the facility's single bed election for use in calculating capacity days
under Minnesota Rules, part 9549.0060, subpart 11; and
(3) establish capacity days based on the number of beds immediately prior to the layaway
and the number of beds after the layaway.
The commissioner shall increase the facility's property payment rate by the incremental increase
in the rental per diem resulting from the recalculation of the facility's rental per diem applying
only the changes resulting from the layaway of beds and clauses (1), (2), and (3). If a facility
reimbursed under section 256B.434 completes a moratorium exception project after its base year,
the base year property rate shall be the moratorium project property rate. The base year rate
shall be inflated by the factors in section 256B.434, subdivision 4, paragraph (c). The property
payment rate increase shall be effective the first day of the month following the month in which
the layaway of the beds becomes effective.
(c) If a nursing facility removes a bed from layaway status in accordance with section
144A.071, subdivision 4b, the commissioner shall establish capacity days based on the number of
licensed and certified beds in the facility not on layaway and shall reduce the nursing facility's
property payment rate in accordance with paragraph (b).
(d) For the rate years beginning on or after July 1, 2000, notwithstanding any provision to
the contrary under section 256B.434, a nursing facility reimbursed under that section, which
has delicensed beds after July 1, 2000, by giving notice of the delicensure to the commissioner
of health according to the notice requirements in section 144A.071, subdivision 4b, shall be
allowed to:
(1) aggregate the applicable investment per bed limits based on the number of beds licensed
immediately prior to entering the alternative payment system;
(2) retain or change the facility's single bed election for use in calculating capacity days
under Minnesota Rules, part 9549.0060, subpart 11; and
(3) establish capacity days based on the number of beds immediately prior to the delicensure
and the number of beds after the delicensure.
The commissioner shall increase the facility's property payment rate by the incremental increase
in the rental per diem resulting from the recalculation of the facility's rental per diem applying
only the changes resulting from the delicensure of beds and clauses (1), (2), and (3). If a facility
reimbursed under section 256B.434 completes a moratorium exception project after its base year,
the base year property rate shall be the moratorium project property rate. The base year rate
shall be inflated by the factors in section 256B.434, subdivision 4, paragraph (c). The property
payment rate increase shall be effective the first day of the month following the month in which
the delicensure of the beds becomes effective.
(e) For nursing facilities reimbursed under this section or section 256B.434, any beds placed
on layaway shall not be included in calculating facility occupancy as it pertains to leave days
defined in Minnesota Rules, part 9505.0415.
(f) For nursing facilities reimbursed under this section or section 256B.434, the rental rate
calculated after placing beds on layaway may not be less than the rental rate prior to placing
beds on layaway.
(g) A nursing facility receiving a rate adjustment as a result of this section shall comply
with section 256B.47, subdivision 2.
(h) A facility that does not utilize the space made available as a result of bed layaway or
delicensure under this subdivision to reduce the number of beds per room or provide more
common space for nursing facility uses or perform other activities related to the operation of the
nursing facility shall have its property rate increase calculated under this subdivision reduced
by the ratio of the square footage made available that is not used for these purposes to the total
square footage made available as a result of bed layaway or delicensure.
    Subd. 31. Nursing facility rate increases beginning July 1, 2001, and July 1, 2002. For
the rate years beginning July 1, 2001, and July 1, 2002, the commissioner shall provide to each
nursing facility reimbursed under this section or section 256B.434 an adjustment equal to 3.0
percent of the total operating payment rate. The operating payment rates in effect on June 30,
2001, shall include the adjustment in subdivision 2i, paragraph (c).
    Subd. 32. Payment during first 90 days. (a) For rate years beginning on or after July 1,
2001, the total payment rate for a facility reimbursed under this section, section 256B.434, or any
other section for the first 90 paid days after admission shall be:
(1) for the first 30 paid days, the rate shall be 120 percent of the facility's medical assistance
rate for each case mix class;
(2) for the next 60 paid days after the first 30 paid days, the rate shall be 110 percent of the
facility's medical assistance rate for each case mix class;
(3) beginning with the 91st paid day after admission, the payment rate shall be the rate
otherwise determined under this section, section 256B.434, or any other section; and
(4) payments under this paragraph apply to admissions occurring on or after July 1, 2001,
and before July 1, 2003, and to resident days occurring before July 30, 2003.
(b) For rate years beginning on or after July 1, 2003, the total payment rate for a facility
reimbursed under this section, section 256B.434, or any other section shall be:
(1) for the first 30 calendar days after admission, the rate shall be 120 percent of the facility's
medical assistance rate for each RUG class;
(2) beginning with the 31st calendar day after admission, the payment rate shall be the rate
otherwise determined under this section, section 256B.434, or any other section; and
(3) payments under this paragraph apply to admissions occurring on or after July 1, 2003.
(c) Effective January 1, 2004, the enhanced rates under this subdivision shall not be allowed
if a resident has resided during the previous 30 calendar days in:
(1) the same nursing facility;
(2) a nursing facility owned or operated by a related party; or
(3) a nursing facility or part of a facility that closed or was in the process of closing.
    Subd. 33. Staged reduction in rate disparities. (a) For the rate years beginning July 1,
2001, and July 1, 2002, the commissioner shall adjust the operating payment rates for low-rate
nursing facilities reimbursed under this section or section 256B.434.
(b) For the rate year beginning July 1, 2001, for each case mix level, if the amount computed
under subdivision 31 is less than the amount in clause (1), the commissioner shall make available
the lesser of the amount in clause (1) or an increase of ten percent over the rate in effect on June
30, 2001, as an adjustment to the operating payment rate. For the rate year beginning July 1, 2002,
for each case mix level, if the amount computed under subdivision 31 is less than the amount in
clause (2), the commissioner shall make available the lesser of the amount in clause (2) or an
increase of ten percent over the rate in effect on June 30, 2002, as an adjustment to the operating
payment rate. For purposes of this subdivision, nursing facilities shall be considered to be metro if
they are located in Anoka, Carver, Dakota, Hennepin, Olmsted, Ramsey, Scott, or Washington
Counties; or in the cities of Moorhead or Breckenridge; or in St. Louis County, north of Toivola
and south of Cook; or in Itasca County, east of a north south line two miles west of Grand Rapids:
(1) Operating Payment Rate Target Level for July 1, 2001:

Case Mix Classification	Metro	Nonmetro
A	$ 76.00	$ 68.13
B	$ 83.40	$ 74.46
C	$ 91.67	$ 81.63
D	$ 99.51	$ 88.04
E	$107.46	$ 94.87
F	$107.96	$ 95.29
G	$114.67	$100.98
H	$126.99	$111.31
I	$131.42	$115.06
J	$138.34	$120.85
K	$152.26	$133.10

(2) Operating Payment Rate Target Level for July 1, 2002:

Case Mix Classification	Metro	Nonmetro
A	$ 78.28	$ 70.51
B	$ 85.91	$ 77.16
C	$ 94.42	$ 84.62
D	$102.50	$ 91.42
E	$110.68	$ 98.40
F	$111.20	$ 98.84
G	$118.11	$104.77
H	$130.80	$115.64
I	$135.38	$119.50
J	$142.49	$125.38
K	$156.85	$137.77

    Subd. 34. Nursing facility rate increases beginning July 1, 2001, and July 1, 2002. (a) For
the rate years beginning July 1, 2001, and July 1, 2002, two-thirds of the money resulting from the
rate adjustment under subdivision 31 and one-half of the money resulting from the rate adjustment
under subdivisions 32 and 33 must be used to increase the wages and benefits and pay associated
costs of all employees except management fees, the administrator, and central office staff.
(b) Money received by a facility as a result of the rate adjustments provided in subdivisions
31 to 33, which must be used as provided in paragraph (a), must be used only for wage and benefit
increases implemented on or after July 1, 2001, or July 1, 2002, respectively, and must not be
used for wage increases implemented prior to those dates.
(c) Nursing facilities may apply for the portions of the rate adjustments under subdivisions
31 to 33, which must be used as provided in paragraph (a). The application must be made to the
commissioner and contain a plan by which the nursing facility will distribute to employees of the
nursing facility the funds, which must be used as provided in paragraph (a). For nursing facilities
in which the employees are represented by an exclusive bargaining representative, an agreement
negotiated and agreed to by the employer and the exclusive bargaining representative constitutes
the plan. A negotiated agreement may constitute the plan only if the agreement is finalized after
the date of enactment of all increases for the rate year. The commissioner shall review the plan to
ensure that the rate adjustments are used as provided in paragraph (a). To be eligible, a facility
must submit its plan for the wage and benefit distribution by December 31 each year. If a facility's
plan for wage and benefit distribution is effective for its employees after July 1 of the year that
the funds are available, the portion of the rate adjustments, which must be used as provided in
paragraph (a), are effective the same date as its plan.
(d) A hospital-attached nursing facility may include costs in their distribution plan for wages
and benefits and associated costs of employees in the organization's shared services departments,
provided that:
(1) the nursing facility and the hospital share common ownership; and
(2) adjustments for hospital services using the diagnostic-related grouping payment rates
per admission under Medicare are less than three percent during the 12 months prior to the
effective date of these rate adjustments.
If a hospital-attached facility meets the qualifications in this paragraph, the difference
between the rate adjustments approved for nursing facility services and the rate increase approved
for hospital services may be permitted as a distribution in the hospital-attached facility's plan
regardless of whether the use of those funds is shown as being attributable to employee hours
worked in the nursing facility or employee hours worked in the hospital.
For the purposes of this paragraph, a hospital-attached nursing facility is one that meets the
definition under subdivision 2j, or, in the case of a facility reimbursed under section 256B.434,
met this definition at the time their last payment rate was established under Minnesota Rules,
parts 9549.0010 to 9549.0080, and this section.
(e) A copy of the approved distribution plan must be made available to all employees by
giving each employee a copy or by posting it in an area of the nursing facility to which all
employees have access. If an employee does not receive the wage and benefit adjustment described
in the facility's approved plan and is unable to resolve the problem with the facility's management
or through the employee's union representative, the employee may contact the commissioner at an
address or telephone number provided by the commissioner and included in the approved plan.
(f) Notwithstanding section 256B.48, subdivision 1, clause (a), upon the request of a nursing
facility, the commissioner may authorize the facility to raise per diem rates for private-pay
residents on July 1 by the amount anticipated to be required upon implementation of the rate
adjustments allowable under subdivisions 31 to 33. The commissioner shall require any amounts
collected under this paragraph, which must be used as provided in paragraph (a), to be placed in
an escrow account established for this purpose with a financial institution that provides deposit
insurance until the medical assistance rate is finalized. The commissioner shall conduct audits
as necessary to ensure that:
(1) the amounts collected are retained in escrow until medical assistance rates are increased
to reflect the wage-related adjustment; and
(2) any amounts collected from private-pay residents in excess of the final medical assistance
rate are repaid to the private-pay residents with interest at the rate used by the commissioner of
revenue for the late payment of taxes and in effect on the date the distribution plan is approved by
the commissioner of human services.
    Subd. 35. Exclusion of raw food cost adjustment. For rate years beginning on or after July
1, 2001, in calculating a nursing facility's operating cost per diem for the purposes of constructing
an array, determining a median, or otherwise performing a statistical measure of nursing facility
payment rates to be used to determine future rate increases under this section, section 256B.434,
or any other section, the commissioner shall exclude adjustments for raw food costs under
subdivision 2b, paragraph (h), that are related to providing special diets based on religious beliefs.
    Subd. 36. Employee scholarship costs and training in English as a second language. (a)
For the period between July 1, 2001, and June 30, 2003, the commissioner shall provide to
each nursing facility reimbursed under this section, section 256B.434, or any other section, a
scholarship per diem of 25 cents to the total operating payment rate to be used:
(1) for employee scholarships that satisfy the following requirements:
(i) scholarships are available to all employees who work an average of at least 20 hours per
week at the facility except the administrator, department supervisors, and registered nurses; and
(ii) the course of study is expected to lead to career advancement with the facility or in
long-term care, including medical care interpreter services and social work; and
(2) to provide job-related training in English as a second language.
(b) A facility receiving a rate adjustment under this subdivision may submit to the
commissioner on a schedule determined by the commissioner and on a form supplied by the
commissioner a calculation of the scholarship per diem, including: the amount received from
this rate adjustment; the amount used for training in English as a second language; the number
of persons receiving the training; the name of the person or entity providing the training; and
for each scholarship recipient, the name of the recipient, the amount awarded, the educational
institution attended, the nature of the educational program, the program completion date, and a
determination of the per diem amount of these costs based on actual resident days.
(c) On July 1, 2003, the commissioner shall remove the 25 cent scholarship per diem from
the total operating payment rate of each facility.
(d) For rate years beginning after June 30, 2003, the commissioner shall provide to each
facility the scholarship per diem determined in paragraph (b). In calculating the per diem under
paragraph (b), the commissioner shall allow only costs related to tuition and direct educational
expenses.
    Subd. 37. Nursing home rate increases effective July 1, 2002. For rate years beginning on
or after July 1, 2002, the commissioner shall provide to each nursing home reimbursed under
this section or section 256B.434 an increase in each case mix payment rate equal to the increase
in the per-bed surcharge paid under section 256.9657, subdivision 1, paragraph (c), divided by
365 and further divided by .80. The increase under this subdivision shall be added following
the determination of the payment rate for the home under this chapter. The increase shall not
be subject to any annual percentage increase.
    Subd. 38. Nursing home rate increases effective in fiscal year 2003. Effective June 1,
2003, the commissioner shall provide to each nursing home reimbursed under this section or
section 256B.434, an increase in each case mix payment rate equal to the increase in the per-bed
surcharge paid under section 256.9657, subdivision 1, paragraph (d), divided by 365 and further
divided by .90. The increase shall not be subject to any annual percentage increase. The 30-day
advance notice requirement in section 256B.47, subdivision 2, shall not apply to rate increases
resulting from this section. The commissioner shall not adjust the rate increase under this
subdivision unless the adjustment is greater than 1.5 percent of the monthly surcharge payment
amount under section 256.9657, subdivision 4.
    Subd. 39. Facility rates beginning on or after July 1, 2003. For rate years beginning on or
after July 1, 2003, nursing facilities reimbursed under this section shall have their July 1 operating
payment rate be equal to their operating payment rate in effect on the prior June 30th.
    Subd. 40. Designation of areas to receive metropolitan rates. (a) For rate years beginning
on or after July 1, 2004, and subject to paragraph (b), nursing facilities located in areas designated
as metropolitan areas by the federal Office of Management and Budget using Census Bureau
data shall be considered metro, in order to:
(1) determine rate increases under this section, section 256B.434, or any other section; and
(2) establish nursing facility reimbursement rates for the new nursing facility reimbursement
system developed under Laws 2001, First Special Session chapter 9, article 5, section 35, as
amended by Laws 2002, chapter 220, article 14, section 19.
(b) Paragraph (a) applies only if designation as a metro facility results in a level of
reimbursement that is higher than the level the facility would have received without application of
that paragraph.
    Subd. 41. Rate increases for October 1, 2005, and October 1, 2006. (a) For the rate
period beginning October 1, 2005, the commissioner shall make available to each nursing facility
reimbursed under this section or section 256B.434 an adjustment equal to 2.2553 percent of the
total operating payment rate, and for the rate year beginning October 1, 2006, the commissioner
shall make available to each nursing facility reimbursed under this section or section 256B.434 an
adjustment equal to 1.2553 percent of the total operating payment rate.
    (b) 75 percent of the money resulting from the rate adjustment under paragraph (a) must
be used to increase wages and benefits and pay associated costs for all employees, except
management fees, the administrator, and central office staff. Except as provided in paragraph (c),
75 percent of the money received by a facility as a result of the rate adjustment provided in
paragraph (a) must be used only for wage, benefit, and staff increases implemented on or after
the effective date of the rate increase each year, and must not be used for increases implemented
prior to that date.
    (c) With respect only to the October 1, 2005, rate increase, a nursing facility that incurred
costs for salary and employee benefit increases first provided after July 1, 2003, may count those
costs towards the amount required to be spent on salaries and benefits under paragraph (b). These
costs must be reported to the commissioner in the form and manner specified by the commissioner.
    (d) Nursing facilities may apply for the portion of the rate adjustment under paragraph (a)
for employee wages and benefits and associated costs. The application must be made to the
commissioner and contain a plan by which the nursing facility will distribute the funds according
to paragraph (b). For nursing facilities in which the employees are represented by an exclusive
bargaining representative, an agreement negotiated and agreed to by the employer and the
exclusive bargaining representative constitutes the plan. A negotiated agreement may constitute
the plan only if the agreement is finalized after the date of enactment of all increases for the rate
year and signed by both parties prior to submission to the commissioner. The commissioner shall
review the plan to ensure that the rate adjustments are used as provided in paragraph (b). To be
eligible, a facility must submit its distribution plan by March 31, 2006, and March 31, 2007,
respectively. The commissioner may approve distribution plans on or before June 30, 2006, and
June 30, 2007, respectively. The commissioner may waive the deadlines in this paragraph under
extraordinary circumstances, either retroactively or prospectively, to be determined at the sole
discretion of the commissioner. If a facility's distribution plan is effective after the first day of the
applicable rate period that the funds are available, the rate adjustments are effective the same
date as the facility's plan.
    (e) A copy of the approved distribution plan must be made available to all employees by
giving each employee a copy or by posting a copy in an area of the nursing facility to which all
employees have access. If an employee does not receive the wage and benefit adjustment described
in the facility's approved plan and is unable to resolve the problem with the facility's management
or through the employee's union representative, the employee may contact the commissioner at an
address or telephone number provided by the commissioner and included in the approved plan.
    Subd. 42. Incentive to establish single-bed rooms. (a) Beginning July 1, 2005, the operating
payment rate for nursing facilities reimbursed under this section, section 256B.434, or 256B.441
shall be increased by 20 percent multiplied by the ratio of the number of new single-bed rooms
created divided by the number of active beds on July 1, 2005, for each bed closure that results
in the creation of a single-bed room after July 1, 2005. The commissioner may implement rate
adjustments for up to 3,000 new single-bed rooms each year. For eligible bed closures for which
the commissioner receives a notice from a facility during a calendar quarter that a bed has been
delicensed and a new single-bed room has been established, the rate adjustment in this paragraph
shall be effective on the first day of the second month following that calendar quarter.
(b) A nursing facility is prohibited from discharging residents for purposes of establishing
single-bed rooms. A nursing facility must submit documentation to the commissioner in a
form prescribed by the commissioner, certifying the occupancy status of beds closed to create
single-bed rooms. In the event that the commissioner determines that a facility has discharged a
resident for purposes of establishing a single-bed room, the commissioner shall not provide a
rate adjustment under paragraph (a).
(c) If after August 1, 2005, and before December 31, 2007, more than 4,000 nursing home
beds are removed from service, a portion of the appropriation for nursing homes shall be
transferred to the alternative care program. The amount of this transfer shall equal the number
of beds removed from service less 4,000, multiplied by the average monthly per-person cost for
alternative care, multiplied by 12, and further multiplied by 0.3.
    Subd. 43. Rate increase for facilities in Stearns, Sherburne, and Benton Counties.
Effective July 1, 2006, operating payment rates of nursing facilities in Stearns, Sherburne, and
Benton Counties that are reimbursed under this section, section 256B.434, or section 256B.441
shall be increased to be equal, for a RUG's rate with a weight of 1.00, to the geographic group III
median rate for the same RUG's weight. The percentage of the operating payment rate for each
facility to be case-mix adjusted shall be equal to the percentage that is case-mix adjusted in that
facility's June 30, 2006, operating payment rate. This subdivision shall apply only if it results in a
rate increase. Increases provided by this subdivision shall be added to the rate determined under
any new reimbursement system established under section 256B.440.
History: 1983 c 199 s 12; 1984 c 640 s 32; 1984 c 641 s 17-20,22; 1984 c 654 art 5 s 58;
1984 c 655 art 1 s 40,41; 1985 c 248 s 40,69; 1985 c 267 s 3; 1Sp1985 c 3 s 25,27-29,31; 1986 c
316 s 2; 1987 c 403 art 2 s 89; art 4 s 6-11; 1988 c 689 art 2 s 154-161; 1988 c 719 art 19 s 9;
1989 c 12 s 1,2; 1989 c 282 art 3 s 66-78; 1990 c 568 art 3 s 65-72; 1991 c 292 art 4 s 54-60; art
6 s 49,50; art 7 s 25; 1992 c 464 art 1 s 29; 1992 c 513 art 7 s 88-103,136; 1992 c 603 s 19; 1993
c 339 s 20; 1Sp1993 c 1 art 5 s 90-99; 1995 c 207 art 6 s 85,86; art 7 s 23-26; 1996 c 305 art 2 s
48; 1996 c 451 art 3 s 3; 1997 c 2 s 10; 1997 c 107 s 8; 1997 c 187 art 3 s 29; 1997 c 203 art 3 s
7,8; art 4 s 46; 1998 c 407 art 3 s 4-11; art 4 s 42; 1999 c 245 art 3 s 17-20; 2000 c 271 s 1; 2000
c 294 s 2; 2000 c 449 s 3-12; 2000 c 488 art 9 s 18-21; 2000 c 499 s 23; 1Sp2001 c 9 art 5 s
15-21; art 6 s 6; 2002 c 220 art 14 s 9,10; 2002 c 277 s 32; 2002 c 374 art 10 s 5,6; 2002 c 375
art 2 s 35-38; 2002 c 379 art 1 s 113; 2003 c 9 s 2; 2003 c 16 s 2; 1Sp2003 c 14 art 2 s 30-35;
2004 c 194 s 1; 2004 c 288 art 5 s 7,8; 2005 c 10 art 1 s 54; 2005 c 56 s 1; 2005 c 151 art 2 s 17;
1Sp2005 c 4 art 7 s 33,34; 2006 c 282 art 20 s 20; 2007 c 147 art 6 s 41-44; art 7 s 19,20