1.1 	A bill for an act
1.2 	relating to human services; setting new payment rates for critical access 
1.3 	hospitals; requiring a new payment methodology for disproportionate share 
1.4 	hospital payments;amending Minnesota Statutes 2014, sections 256.969, 
1.5 	subdivisions 2b, 9; 256B.75.
1.6 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.7 	Section 1. Minnesota Statutes 2014, section 256.969, subdivision 2b, is amended to read:
1.8 		Subd. 2b.Hospital payment rates. (a) For discharges occurring on or after 
1.9 	November 1, 2014, hospital inpatient services for hospitals located in Minnesota shall be 
1.10 	paid according to the following:
1.11 	(1) critical access hospitals as defined by Medicare shall be paid using a cost-based 
1.12 	methodology;
1.13 	(2) long-term hospitals as defined by Medicare shall be paid on a per diem 
1.14 	methodology under subdivision 25;
1.15 	(3) rehabilitation hospitals or units of hospitals that are recognized as rehabilitation 
1.16 	distinct parts as defined by Medicare shall be paid according to the methodology under 
1.17 	subdivision 12; and
1.18 	(4) all other hospitals shall be paid on a diagnosis-related group (DRG) methodology.
1.19 	(b) For the period beginning January 1, 2011, through October 31, 2014, rates shall 
1.20 	not be rebased, except that a Minnesota long-term hospital shall be rebased effective 
1.21 	January 1, 2011, based on its most recent Medicare cost report ending on or before 
1.22 	September 1, 2008, with the provisions under subdivisions 9 and 23, based on the rates 
1.23 	in effect on December 31, 2010. For rate setting periods after November 1, 2014, in 
1.24 	which the base years are updated, a Minnesota long-term hospital's base year shall remain 
1.25 	within the same period as other hospitals.
2.1 	(c) Effective for discharges occurring on and after November 1, 2014, payment rates 
2.2 	for hospital inpatient services provided by hospitals located in Minnesota or the local trade 
2.3 	area, except for the hospitals paid under the methodologies described in paragraph (a), 
2.4 	clauses (2) and (3), shall be rebased, incorporating cost and payment methodologies in a 
2.5 	manner similar to Medicare. The base year for the rates effective November 1, 2014, shall 
2.6 	be calendar year 2012. The rebasing under this paragraph shall be budget neutral, ensuring 
2.7 	that the total aggregate payments under the rebased system are equal to the total aggregate 
2.8 	payments that were made for the same number and types of services in the base year. 
2.9 	Separate budget neutrality calculations shall be determined for payments made to critical 
2.10 	access hospitals and payments made to hospitals paid under the DRG system. Only the rate 
2.11 	increases or decreases under subdivision 3a or 3c that applied to the hospitals being rebased 
2.12 	during the entire base period shall be incorporated into the budget neutrality calculation.
2.13 	(d) For discharges occurring on or after November 1, 2014, through June 30, 2016, 
2.14 	the rebased rates under paragraph (c) shall include adjustments to the projected rates that 
2.15 	result in no greater than a five percent increase or decrease from the base year payments 
2.16 	for any hospital. Any adjustments to the rates made by the commissioner under this 
2.17 	paragraph and paragraph (e) shall maintain budget neutrality as described in paragraph (c).
2.18 	(e) For discharges occurring on or after November 1, 2014, through June 30, 2016, 
2.19 	the commissioner may make additional adjustments to the rebased rates, and when 
2.20 	evaluating whether additional adjustments should be made, the commissioner shall 
2.21 	consider the impact of the rates on the following:
2.22 	(1) pediatric services;
2.23 	(2) behavioral health services;
2.24 	(3) trauma services as defined by the National Uniform Billing Committee;
2.25 	(4) transplant services;
2.26 	(5) obstetric services, newborn services, and behavioral health services provided 
2.27 	by hospitals outside the seven-county metropolitan area;
2.28 	(6) outlier admissions;
2.29 	(7) low-volume providers; and
2.30 	(8) services provided by small rural hospitals that are not critical access hospitals.
2.31 	(f) Hospital payment rates established under paragraph (c) must incorporate the 
2.32 	following:
2.33 	(1) for hospitals paid under the DRG methodology, the base year payment rate per 
2.34 	admission is standardized by the applicable Medicare wage index and adjusted by the 
2.35 	hospital's disproportionate population adjustment;
3.1 	(2) for critical access hospitals, interim per diem payment rates shall be based on the 
3.2 	ratio of cost and charges reported on the base year Medicare cost report or reports and 
3.3 	applied to medical assistance utilization data. Final settlement payments for a state fiscal 
3.4 	year must be determined based on a review of the medical assistance cost report required 
3.5 	under subdivision 4b for the applicable state fiscal year;
3.6 	(3) the cost and charge data used to establish hospital payment rates must only 
3.7 	reflect inpatient services covered by medical assistance; and
3.8 	(4) in determining hospital payment rates for discharges occurring on or after the 
3.9 	rate year beginning January 1, 2011, through December 31, 2012, the hospital payment 
3.10 	rate per discharge shall be based on the cost-finding methods and allowable costs of the 
3.11 	Medicare program in effect during the base year or years.
3.12 	(g) The commissioner shall validate the rates effective November 1, 2014, by 
3.13 	applying the rates established under paragraph (c), and any adjustments made to the rates 
3.14 	under paragraph (d) or (e), to hospital claims paid in calendar year 2013 to determine 
3.15 	whether the total aggregate payments for the same number and types of services under the 
3.16 	rebased rates are equal to the total aggregate payments made during calendar year 2013.
3.17 	(h) Effective for discharges occurring on or after July 1, 2017, and every two 
3.18 	years thereafter, payment rates under this section shall be rebased to reflect only those 
3.19 	changes in hospital costs between the existing base year and the next base year. The 
3.20 	commissioner shall establish the base year for each rebasing period considering the most 
3.21 	recent year for which filed Medicare cost reports are available. The estimated change in 
3.22 	the average payment per hospital discharge resulting from a scheduled rebasing must be 
3.23 	calculated and made available to the legislature by January 15 of each year in which 
3.24 	rebasing is scheduled to occur, and must include by hospital the differential in payment 
3.25 	rates compared to the individual hospital's costs.
3.26 	(i) Effective for discharges occurring on or after July 1, 2015, payment rates for 
3.27 	critical access hospitals located in Minnesota or the local trade area shall be determined 
3.28 	using a new cost-based methodology. The commissioner shall establish within the 
3.29 	methodology tiers of payment designed to promote efficiency and cost-effectiveness. 
3.30 	Annual payments to hospitals under this paragraph shall equal the total cost for critical 
3.31 	access hospitals as reflected in base year cost reports. The new cost-based rate shall be 
3.32 	the final rate and shall not be settled to actual incurred costs. The factors used to develop 
3.33 	the new methodology may include but are not limited to:
3.34 	(1) the ratio between the hospital's costs for treating medical assistance patients and 
3.35 	the hospital's charges to the medical assistance program;
4.1 	(2) the ratio between the hospital's costs for treating medical assistance patients and 
4.2 	the hospital's payments received from the medical assistance program for the care of 
4.3 	medical assistance patients;
4.4 	(3) the ratio between the hospital's charges to the medical assistance program and 
4.5 	the hospital's payments received from the medical assistance program for the care of 
4.6 	medical assistance patients;
4.7 	(4) the statewide average increases in the ratios identified in clauses (1), (2), and (3);
4.8 	(5) the proportion of that hospital's costs that are administrative and trends in 
4.9 	administrative costs; and
4.10 	(6) geographic location.

4.11 	Sec. 2. Minnesota Statutes 2014, section 256.969, subdivision 9, is amended to read:
4.12 		Subd. 9.Disproportionate numbers of low-income patients served. (a) For 
4.13 	admissions occurring on or after July 1, 1993, the medical assistance disproportionate 
4.14 	population adjustment shall comply with federal law and shall be paid to a hospital, 
4.15 	excluding regional treatment centers and facilities of the federal Indian Health Service, 
4.16 	with a medical assistance inpatient utilization rate in excess of the arithmetic mean. The 
4.17 	adjustment must be determined as follows:
4.18 	(1) for a hospital with a medical assistance inpatient utilization rate above the 
4.19 	arithmetic mean for all hospitals excluding regional treatment centers and facilities of the 
4.20 	federal Indian Health Service but less than or equal to one standard deviation above the 
4.21 	mean, the adjustment must be determined by multiplying the total of the operating and 
4.22 	property payment rates by the difference between the hospital's actual medical assistance 
4.23 	inpatient utilization rate and the arithmetic mean for all hospitals excluding regional 
4.24 	treatment centers and facilities of the federal Indian Health Service; and
4.25 	(2) for a hospital with a medical assistance inpatient utilization rate above one 
4.26 	standard deviation above the mean, the adjustment must be determined by multiplying 
4.27 	the adjustment that would be determined under clause (1) for that hospital by 1.1. 
4.28 	The commissioner may establish a separate disproportionate population payment rate 
4.29 	adjustment for critical access hospitals. The commissioner shall report annually on the 
4.30 	number of hospitals likely to receive the adjustment authorized by this paragraph. The 
4.31 	commissioner shall specifically report on the adjustments received by public hospitals and 
4.32 	public hospital corporations located in cities of the first class.
4.33 	(b) Certified public expenditures made by Hennepin County Medical Center shall 
4.34 	be considered Medicaid disproportionate share hospital payments. Hennepin County 
4.35 	and Hennepin County Medical Center shall report by June 15, 2007, on payments made 
5.1 	beginning July 1, 2005, or another date specified by the commissioner, that may qualify 
5.2 	for reimbursement under federal law. Based on these reports, the commissioner shall 
5.3 	apply for federal matching funds.
5.4 	(c) Upon federal approval of the related state plan amendment, paragraph (b) is 
5.5 	effective retroactively from July 1, 2005, or the earliest effective date approved by the 
5.6 	Centers for Medicare and Medicaid Services.
5.7 	(d) Effective July 1, 2015, disproportionate share hospital (DSH) payments shall 
5.8 	be paid in accordance with a new methodology. Annual DSH payments made under 
5.9 	this paragraph shall equal the total amount of DSH payments made for 2012. The new 
5.10 	methodology shall take into account a variety of factors, including but not limited to:
5.11 	(1) the medical assistance utilization rate of the hospitals that receive payments 
5.12 	under this subdivision;
5.13 	(2) whether the hospital is located within Minnesota;
5.14 	(3) the difference between a hospital's costs for treating medical assistance patients 
5.15 	and the total amount of payments received from medical assistance;
5.16 	(4) the percentage of uninsured patient days at each qualifying hospital in relation 
5.17 	to the total number of uninsured patient days statewide;
5.18 	(5) the hospital's status as a hospital authorized to make presumptive eligibility 
5.19 	determinations for medical assistance in accordance with section 256B.057, subdivision 12;
5.20 	(6) the hospital's status as a safety net, critical access, children's, rehabilitation, or 
5.21 	long-term hospital;
5.22 	(7) whether the hospital's administrative cost of compiling the necessary DSH 
5.23 	reports exceeds the anticipated value of any calculated DSH payment; and
5.24 	(8) whether the hospital provides specific services designated by the commissioner 
5.25 	to be of particular importance to the medical assistance program.
5.26 	(e) Any payments or portion of payments made to a hospital under this subdivision 
5.27 	that are subsequently returned to the commissioner because the payments are found to 
5.28 	exceed the hospital-specific DSH limit for that hospital shall be redistributed to other 
5.29 	DSH-eligible hospitals in a manner established by the commissioner.

5.30 	Sec. 3. Minnesota Statutes 2014, section 256B.75, is amended to read:
5.31 	256B.75 HOSPITAL OUTPATIENT REIMBURSEMENT.
5.32 	(a) For outpatient hospital facility fee payments for services rendered on or after 
5.33 	October 1, 1992, the commissioner of human services shall pay the lower of (1) submitted 
5.34 	charge, or (2) 32 percent above the rate in effect on June 30, 1992, except for those 
5.35 	services for which there is a federal maximum allowable payment. Effective for services 
6.1 	rendered on or after January 1, 2000, payment rates for nonsurgical outpatient hospital 
6.2 	facility fees and emergency room facility fees shall be increased by eight percent over the 
6.3 	rates in effect on December 31, 1999, except for those services for which there is a federal 
6.4 	maximum allowable payment. Services for which there is a federal maximum allowable 
6.5 	payment shall be paid at the lower of (1) submitted charge, or (2) the federal maximum 
6.6 	allowable payment. Total aggregate payment for outpatient hospital facility fee services 
6.7 	shall not exceed the Medicare upper limit. If it is determined that a provision of this 
6.8 	section conflicts with existing or future requirements of the United States government with 
6.9 	respect to federal financial participation in medical assistance, the federal requirements 
6.10 	prevail. The commissioner may, in the aggregate, prospectively reduce payment rates to 
6.11 	avoid reduced federal financial participation resulting from rates that are in excess of 
6.12 	the Medicare upper limitations.
6.13 	(b) Notwithstanding paragraph (a), payment for outpatient, emergency, and 
6.14 	ambulatory surgery hospital facility fee services for critical access hospitals designated 
6.15 	under section 144.1483, clause (9), shall be paid on a cost-based payment system that is 
6.16 	based on the cost-finding methods and allowable costs of the Medicare program.
6.17 	(c) Effective for services provided on or after July 1, 2003, rates that are based 
6.18 	on the Medicare outpatient prospective payment system shall be replaced by a budget 
6.19 	neutral prospective payment system that is derived using medical assistance data. The 
6.20 	commissioner shall provide a proposal to the 2003 legislature to define and implement 
6.21 	this provision.
6.22 	(d) For fee-for-service services provided on or after July 1, 2002, the total payment, 
6.23 	before third-party liability and spenddown, made to hospitals for outpatient hospital 
6.24 	facility services is reduced by .5 percent from the current statutory rate.
6.25 	(e) In addition to the reduction in paragraph (d), the total payment for fee-for-service 
6.26 	services provided on or after July 1, 2003, made to hospitals for outpatient hospital 
6.27 	facility services before third-party liability and spenddown, is reduced five percent from 
6.28 	the current statutory rates. Facilities defined under section 256.969, subdivision 16, are 
6.29 	excluded from this paragraph.
6.30 	(f) In addition to the reductions in paragraphs (d) and (e), the total payment for 
6.31 	fee-for-service services provided on or after July 1, 2008, made to hospitals for outpatient 
6.32 	hospital facility services before third-party liability and spenddown, is reduced three 
6.33 	percent from the current statutory rates. Mental health services and facilities defined under 
6.34 	section 256.969, subdivision 16, are excluded from this paragraph.
7.1 	(g) Effective for services provided on or after July 1, 2015, rates established for 
7.2 	critical access hospitals under paragraph (b) for the applicable payment year shall be the 
7.3 	final payment and shall not be settled to actual costs.