1.1 	A bill for an act
1.2 	relating to human services; modifying the nursing facility reimbursement 
1.3 	system;amending Minnesota Statutes 2014, sections 256B.0915, subdivision 3a; 
1.4 	256B.441, subdivisions 1, 5, 13, 14, 17, 30, 31, 35, 48, 50, 51, 51a, 53, 54, 56, 
1.5 	by adding subdivisions; repealing Minnesota Statutes 2014, section 256B.441, 
1.6 	subdivisions 14a, 19, 50a, 52, 55, 58, 62.
1.7 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.8 	Section 1. Minnesota Statutes 2014, section 256B.0915, subdivision 3a, is amended to 
1.9 	read:
1.10 		Subd. 3a.Elderly waiver cost limits. (a) The monthly limit for the cost of 
1.11 	waivered services to an individual elderly waiver client except for individuals described 
1.12 	in paragraphs (b) and (d) shall be the weighted average monthly nursing facility rate of 
1.13 	the case mix resident class to which the elderly waiver client would be assigned under 
1.14 	Minnesota Rules, parts 9549.0050 to 9549.0059, less the recipient's maintenance needs 
1.15 	allowance as described in subdivision 1d, paragraph (a), until the first day of the state fiscal 
1.16 	year in which the resident assessment system as described in section 256B.438 for nursing 
1.17 	home rate determination is implemented. Effective on the first day of the state fiscal year 
1.18 	in which the resident assessment system as described in section 256B.438 for nursing 
1.19 	home rate determination is implemented and the first day of each subsequent state fiscal 
1.20 	year, the monthly limit for the cost of waivered services to an individual elderly waiver 
1.21 	client shall be the rate of the case mix resident class to which the waiver client would be 
1.22 	assigned under Minnesota Rules, parts 9549.0050 to 9549.0059, in effect on the last 
1.23 	day of the previous state fiscal year, adjusted by the greater of any legislatively adopted 
1.24 	home and community-based services percentage rate adjustment or the average statewide 
1.25 	percentage increase in nursing facility operating payment rates under section 256B.441.
2.1 	(b) The monthly limit for the cost of waivered services under paragraph (a) to an 
2.2 	individual elderly waiver client assigned to a case mix classification A under paragraph 
2.3 	(a) with:
2.4 	(1) no dependencies in activities of daily living; or
2.5 	(2) up to two dependencies in bathing, dressing, grooming, walking, and eating 
2.6 	when the dependency score in eating is three or greater as determined by an assessment 
2.7 	performed under section 256B.0911 shall be $1,750 per month effective on July 1, 2011, 
2.8 	for all new participants enrolled in the program on or after July 1, 2011. This monthly 
2.9 	limit shall be applied to all other participants who meet this criteria at reassessment. This 
2.10 	monthly limit shall be increased annually as described in paragraph (a).
2.11 	(c) If extended medical supplies and equipment or environmental modifications are 
2.12 	or will be purchased for an elderly waiver client, the costs may be prorated for up to 
2.13 	12 consecutive months beginning with the month of purchase. If the monthly cost of a 
2.14 	recipient's waivered services exceeds the monthly limit established in paragraph (a) or 
2.15 	(b), the annual cost of all waivered services shall be determined. In this event, the annual 
2.16 	cost of all waivered services shall not exceed 12 times the monthly limit of waivered 
2.17 	services as described in paragraph (a) or (b).
2.18 	(d) Effective July 1, 2013, the monthly cost limit of waiver services, including 
2.19 	any necessary home care services described in section 256B.0651, subdivision 2, for 
2.20 	individuals who meet the criteria as ventilator-dependent given in section 256B.0651, 
2.21 	subdivision 1, paragraph (g), shall be the average of the monthly medical assistance 
2.22 	amount established for home care services as described in section 256B.0652, subdivision 
2.23 	7, and the annual average contracted amount established by the commissioner for nursing 
2.24 	facility services for ventilator-dependent individuals. This monthly limit shall be increased 
2.25 	annually as described in paragraph (a).

2.26 	Sec. 2. Minnesota Statutes 2014, section 256B.441, subdivision 1, is amended to read:
2.27 		Subdivision 1.Rebasing Calculation  of nursing facility operating payment 
2.28 	rates. (a) The commissioner shall rebase nursing facility operating payment rates to align 
2.29 	payments to facilities with the cost of providing care. The rebased calculate  operating 
2.30 	payment rates shall be calculated using the statistical and cost report filed by each nursing 
2.31 	facility for the report period ending one year prior to the rate year.
2.32 	(b) The new operating payment rates based on this section shall take effect beginning
2.33 	with the rate year beginning October 1, 2008, and shall be phased in over eight rate years 
2.34 	through October 1, 2015. For each year of the phase-in, the operating payment rates shall 
3.1 	be calculated using the statistical and cost report filed by each nursing facility for the 
3.2 	report period ending one year prior to the rate year 2015.
3.3 	(c) Operating payment rates shall be rebased on October 1, 2016, and every two 
3.4 	years after that date.
3.5 	(d) Each cost reporting year shall begin on October 1 and end on the following 
3.6 	September 30. Beginning in 2014, A statistical and cost report shall be filed by each 
3.7 	nursing facility by February 1. Notice of rates shall be distributed by August 15 and the 
3.8 	rates shall go into effect on October 1 for one year.
3.9 	(e) (d)  Effective October 1, 2014 2016, property rates shall be rebased in accordance 
3.10 	with section 256B.431 and Minnesota Rules, chapter 9549. The commissioner shall 
3.11 	determine what the property payment rate for a nursing facility would be had the facility 
3.12 	not had its property rate determined under section 256B.434. The commissioner shall 
3.13 	allow nursing facilities to provide information affecting this rate determination that would 
3.14 	have been filed annually under Minnesota Rules, chapter 9549, and nursing facilities shall 
3.15 	report information necessary to determine allowable debt. The commissioner shall use 
3.16 	this information to determine the property payment rate recalculated based on a new 
3.17 	property rate system to be developed by the commissioner in consultation with nursing 
3.18 	facility providers and other stakeholders. The new property system shall be designed 
3.19 	to provide payment rates that allow providers to efficiently meet consumer needs and 
3.20 	preferences throughout the state.

3.21 	Sec. 3. Minnesota Statutes 2014, section 256B.441, subdivision 5, is amended to read:
3.22 		Subd. 5.Administrative costs. "Administrative costs" means the direct costs for 
3.23 	administering the overall activities of the nursing home. These costs include salaries and 
3.24 	wages of the administrator, assistant administrator, business office employees, security 
3.25 	guards, and associated fringe benefits and payroll taxes, fees, contracts, or purchases 
3.26 	related to business office functions, licenses, and permits except as provided in the 
3.27 	external fixed costs category, employee recognition, travel including meals and lodging, 
3.28 	all training except as specified in subdivision 11, voice and data communication or 
3.29 	transmission, office supplies, property and liability insurance and other forms of insurance 
3.30 	not designated to other areas, personnel recruitment, legal services, accounting services, 
3.31 	management or business consultants, data processing, information technology, Web 
3.32 	site, central or home office costs, business meetings and seminars, postage, fees for 
3.33 	professional organizations, subscriptions, security services, advertising, board of director's 
3.34 	fees, working capital interest expense, and bad debts and bad debt collection fees.

4.1 	Sec. 4. Minnesota Statutes 2014, section 256B.441, is amended by adding a 
4.2 	subdivision to read:
4.3 		Subd. 11a.Employer health insurance costs. "Employer health insurance costs" 
4.4 	means premium expenses for group coverage and reinsurance, actual expenses incurred 
4.5 	for self-insured plans, and employer contributions to employee health reimbursement and 
4.6 	savings accounts. Premium and expense costs and contributions shall only be allowable if 
4.7 	they are for employees who meet the definition of full time employees under the federal 
4.8 	Affordable Care Act, Public Law 111-148.

4.9 	Sec. 5. Minnesota Statutes 2014, section 256B.441, subdivision 13, is amended to read:
4.10 		Subd. 13.External fixed costs. "External fixed costs" means costs related to the 
4.11 	nursing home surcharge under section 256.9657, subdivision 1; licensure fees under 
4.12 	section 144.122; until September 30, 2013, long-term care consultation fees under 
4.13 	section 256B.0911, subdivision 6; family advisory council fee under section 144A.33; 
4.14 	scholarships under section 256B.431, subdivision 36; planned closure rate adjustments 
4.15 	under section 256B.437; or single bed room incentives under section 256B.431, 
4.16 	subdivision 42; property taxes and property insurance, assessments, and payments in lieu 
4.17 	of taxes; employer health insurance costs; and PERA.

4.18 	Sec. 6. Minnesota Statutes 2014, section 256B.441, subdivision 14, is amended to read:
4.19 		Subd. 14.Facility average case mix index. "Facility average case mix index" 
4.20 	or "CMI" means a numerical value score that describes the relative resource use for 
4.21 	all residents within the groups under the resource utilization group (RUG-III RUG) 
4.22 	classification system prescribed by the commissioner based on an assessment of each 
4.23 	resident. The facility average CMI shall be computed as the standardized days divided by 
4.24 	total days for all residents in the facility. The RUG's weights used in this section shall be 
4.25 	as follows for each RUG's class: SE3 1.605; SE2 1.247; SE1 1.081; RAD 1.509; RAC 
4.26 	1.259; RAB 1.109; RAA 0.957; SSC 1.453; SSB 1.224; SSA 1.047; CC2 1.292; CC1 
4.27 	1.200; CB2 1.086; CB1 1.017; CA2 0.908; CA1 0.834; IB2 0.877; IB1 0.817; IA2 0.720; 
4.28 	IA1 0.676; BB2 0.956; BB1 0.885; BA2 0.716; BA1 0.673; PE2 1.199; PE1 1.104; PD2 
4.29 	1.023; PD1 0.948; PC2 0.926; PC1 0.860; PB2 0.786; PB1 0.734; PA2 0.691; PA1 0.651; 
4.30 	BC1 0.651; and DDF 1.000 shall be based on the system prescribed in section 256B.438.

4.31 	Sec. 7. Minnesota Statutes 2014, section 256B.441, subdivision 17, is amended to read:
4.32 		Subd. 17.Fringe benefit costs. "Fringe benefit costs" means the costs for group 
4.33 	life, health, dental, workers' compensation, and other employee insurances and pension, 
5.1 	except for the Public Employee Retirement Association; profit sharing,; and retirement 
5.2 	plans for which the employer pays all or a portion of the costs.

5.3 	Sec. 8. Minnesota Statutes 2014, section 256B.441, subdivision 30, is amended to read:
5.4 		Subd. 30.Peer groups. (a) Facilities shall be classified into three two  groups by 
5.5 	county. The groups shall consist of:
5.6 	(1) group one: facilities in Anoka, Benton, Blue Earth, Carlton, Carver, Chisago, 
5.7 	Clay, Cook, Crow Wing, Dakota, Dodge, Goodhue, Hennepin, Isanti, Kanabec, Lake, 
5.8 	Le Sueur, McLeod, Meeker, Mille Lacs, Morrison, Nicollet, Olmsted, Pine, Ramsey, 
5.9 	Rice, Scott, Sherburne, Sibley, St. Louis, Stearns, Steele, Wabasha, Waseca, Washington, 
5.10 	Winona, or Wright County; and
5.11 	(2) group two: facilities in Aitkin, Beltrami, Blue Earth, Brown, Cass, Clay, 
5.12 	Cook, Crow Wing, Faribault, Fillmore, Freeborn, Houston, Hubbard, Itasca, Kanabec, 
5.13 	Koochiching, Lake, Lake of the Woods, Le Sueur, Martin, McLeod, Meeker, Mower, 
5.14 	Nicollet, Norman, Pine, Roseau, Sibley, Todd, Wadena, Waseca, Watonwan, or Wilkin 
5.15 	County; and
5.16 	(3) group three two: facilities in all other counties.
5.17 	(b) The commissioner shall regularly review the appropriations of the peer groups 
5.18 	established in paragraph (a). The review shall use the most recent cost report data and look 
5.19 	at relative wages for nursing department positions across counties. The commissioner shall 
5.20 	provide a report to the chairs and ranking minority members of the legislative committees 
5.21 	with jurisdiction over nursing facility payment rates on the review of the wage data every 
5.22 	two years beginning on January 15, 2017. The report may include recommendations to 
5.23 	change the assignment of counties between the two groups based on the review of the data.

5.24 	Sec. 9. Minnesota Statutes 2014, section 256B.441, subdivision 31, is amended to read:
5.25 		Subd. 31.Prior system operating cost payment rate. "Prior system operating cost 
5.26 	payment rate" means the operating cost payment rate in effect on September 30, 2008
5.27 	2015, under Minnesota Rules and Minnesota Statutes, not including planned closure 
5.28 	rate adjustments under section 256B.437 or single bed room incentives under section 
5.29 	256B.431, subdivision 42.

5.30 	Sec. 10. Minnesota Statutes 2014, section 256B.441, subdivision 35, is amended to read:
5.31 		Subd. 35.Reporting period. "Reporting period" means the one-year period 
5.32 	beginning on October 1 and ending on the following September 30 during which incurred 
5.33 	costs are accumulated and then reported on the statistical and cost report. If a facility is 
6.1 	reporting for an interim or settle-up period, the reporting period beginning date may be a 
6.2 	date other than October 1. An interim or settle-up report must cover at least five months, 
6.3 	but no more than 17 months, and must always end on September 30.

6.4 	Sec. 11. Minnesota Statutes 2014, section 256B.441, subdivision 48, is amended to read:
6.5 		Subd. 48.Calculation of operating care-related  per diems. The direct care per 
6.6 	diem for each facility shall be the facility's direct care costs divided by its standardized 
6.7 	days. The other care-related per diem shall be the sum of the facility's activities costs, 
6.8 	other direct care costs, raw food costs, therapy costs, and social services costs, divided by 
6.9 	the facility's resident days. The other operating per diem shall be the sum of the facility's 
6.10 	administrative costs, dietary costs, housekeeping costs, laundry costs, and maintenance 
6.11 	and plant operations costs divided by the facility's resident days.

6.12 	Sec. 12. Minnesota Statutes 2014, section 256B.441, subdivision 50, is amended to read:
6.13 		Subd. 50.Determination of total care-related limit. (a) The limit on the median 
6.14 	total care-related per diem shall be determined for each peer group and facility type group 
6.15 	combination. A facility's total care-related per diems shall be limited to 120 percent of the 
6.16 	median for the facility's peer and facility type group. The facility-specific direct care costs 
6.17 	used in making this comparison and in the calculation of the median shall be based on a 
6.18 	RUG's weight of 1.00. A facility that is above that limit shall have its total care-related per 
6.19 	diem reduced to the limit. If a reduction of the total care-related per diem is necessary 
6.20 	because of this limit, the reduction shall be made proportionally to both the direct care per 
6.21 	diem and the other care-related per diem.
6.22 	(b) Beginning with rates determined for October 1, 2016, The A facility's total 
6.23 	care-related limit shall be a variable amount based on each facility's quality score, as 
6.24 	determined under subdivision 44, in accordance with clauses (1) to (4) (3):
6.25 	(1) for each facility, the commissioner shall determine the quality score, subtract 40, 
6.26 	divide by 40, and convert to a percentage;
6.27 	(2) if the value determined in clause (1) is less than zero (1) for each facility with a 
6.28 	quality score of ten or less, the total care-related limit shall be 105 95  percent of the 
6.29 	median for the facility's peer and facility type group;
6.30 	(3) if the value determined in clause (1) is greater than 100 percent (2) for each 
6.31 	facility with a quality score of 90 or more, the total care-related limit shall be 125 140 
6.32 	percent of the median for the facility's peer and facility type group; and
6.33 	(4) if the value determined in clause (1) is greater than zero and less than 100 
6.34 	percent, the total care-related limit shall be 105 percent of the median for the facility's peer 
7.1 	and facility type group plus one-fifth of the percentage determined in clause (1) (3) for 
7.2 	each facility with a quality score of more than ten and less than 90, the total care-related 
7.3 	limit shall be computed by:
7.4 	(i) computing the difference between the facility's quality score and ten;
7.5 	(ii) dividing the amount in item (i) by 80; 
7.6 	(iii) multiplying the amount in item (ii) by 0.45; 
7.7 	(iv) adding the amount in item (iii) to 0.95; and
7.8 	(v) multiplying the amount in item (iv) by the median for the facility's peer group.
7.9 	(c) A RUG's weight of 1.00 shall be used in the calculation of each peer group's 
7.10 	median total care-related per diem, and in comparisons of facility-specific direct care 
7.11 	costs to the peer group median.
7.12 	(d) A facility that is above its total care-related limit as determined according to 
7.13 	paragraph (b) shall have its total care-related per diem reduced to its limit. If a reduction 
7.14 	of the total care-related per diem is necessary due to this limit, the reduction shall be made 
7.15 	proportionally to both the direct care per diem and the other care-related per diem.

7.16 	Sec. 13. Minnesota Statutes 2014, section 256B.441, subdivision 51, is amended to read:
7.17 		Subd. 51.Determination of other operating limit price. The limit on the A price 
7.18 	for  other operating per diem costs  shall be determined for each peer group. A facility's 
7.19 	other operating per diem shall be limited to The price shall be calculated as  105 percent 
7.20 	of the median other operating per diem for itsa facility's peer group. A facility that is 
7.21 	above that limit shall have its other operating per diem reduced to the limit The other 
7.22 	operating per diem shall be the sum of each facility's administrative costs, dietary costs, 
7.23 	housekeeping costs, laundry costs, and maintenance and plant operations costs divided 
7.24 	by each facility's resident days.

7.25 	Sec. 14. Minnesota Statutes 2014, section 256B.441, subdivision 51a, is amended to 
7.26 	read:
7.27 		Subd. 51a.Exception allowing contracting for specialized care facilities. (a) 
7.28 	For rate years beginning on or after October 1, 2016, the commissioner may negotiate 
7.29 	increases to the care-related limit for nursing facilities that provide specialized care, at a 
7.30 	cost to the general fund not to exceed $600,000 per year. The commissioner shall publish 
7.31 	a request for proposals annually, and may negotiate increases to the limits that shall apply 
7.32 	for either one or two years before the increase shall be subject to a new proposal and 
7.33 	negotiation. The 2015, the  care-related limit mayfor specialized care facilities shall 
7.34 	be increased by up to 50 percent.
8.1 	(b) In selecting facilities with which to negotiate, the commissioner shall consider: 
8.2 	Specialized care facilities are defined as having a program license issued under chapter 
8.3 	245A and Minnesota Rules, chapter 9570, or a facility with 96 beds on January 1, 2015, 
8.4 	located in Robbinsdale that specializes in the treatment of Huntington's Disease.
8.5 	(1) the diagnoses or other circumstances of residents in the specialized program that 
8.6 	require care that costs substantially more than the RUG's rates associated with those 
8.7 	residents;
8.8 	(2) the nature of the specialized program or programs offered to meet the needs 
8.9 	of these individuals; and
8.10 	(3) outcomes achieved by the specialized program.

8.11 	Sec. 15. Minnesota Statutes 2014, section 256B.441, subdivision 53, is amended to read:
8.12 		Subd. 53.Calculation of payment rate for external fixed costs. The commissioner 
8.13 	shall calculate a payment rate for external fixed costs.
8.14 	(a) For a facility licensed as a nursing home, the portion related to section 256.9657 
8.15 	shall be equal to $8.86. For a facility licensed as both a nursing home and a boarding care 
8.16 	home, the portion related to section 256.9657 shall be equal to $8.86 multiplied by the 
8.17 	result of its number of nursing home beds divided by its total number of licensed beds.
8.18 	(b) The portion related to the licensure fee under section 144.122, paragraph (d), 
8.19 	shall be the amount of the fee divided by actual resident days.
8.20 	(c)  The portion related to development and education of resident and family advisory 
8.21 	councils under section 144A.33 shall be $5 divided by 365.
8.22 	(d) The portion related to scholarships shall be determined under section 256B.431, 
8.23 	subdivision 36.
8.24 	(d) Until September 30, 2013, the portion related to long-term care consultation shall 
8.25 	be determined according to section 256B.0911, subdivision 6.
8.26 	(e) The portion related to development and education of resident and family advisory 
8.27 	councils under section 144A.33 shall be $5 divided by 365.
8.28 	(f) (e) The portion related to planned closure rate adjustments shall be as determined 
8.29 	under section 256B.437, subdivision 6, and Minnesota Statutes 2010, section 256B.436. 
8.30 	Planned closure rate adjustments that take effect before October 1, 2014, shall no longer 
8.31 	be included in the payment rate for external fixed costs beginning October 1, 2016. 
8.32 	Planned closure rate adjustments that take effect on or after October 1, 2014, shall no 
8.33 	longer be included in the payment rate for external fixed costs beginning on October 1 of 
8.34 	the first year not less than two years after their effective date.
9.1 	(f) The single bed room incentives shall be as determined under section 256B.431, 
9.2 	subdivision 42.
9.3 	(g) The portions related to property insurance, real estate taxes, special assessments, 
9.4 	and payments made in lieu of real estate taxes directly identified or allocated to the nursing 
9.5 	facility shall be the actual amounts divided by actual resident days.
9.6 	(h)  The portion related to employer health insurance costs shall be the allowable 
9.7 	costs divided by resident days.
9.8 	(i) The portion related to the Public Employees Retirement Association shall be 
9.9 	actual costs divided by resident days.
9.10 	(i) The single bed room incentives shall be as determined under section 256B.431, 
9.11 	subdivision 42. Single bed room incentives that take effect before October 1, 2014, shall 
9.12 	no longer be included in the payment rate for external fixed costs beginning October 1, 
9.13 	2016. Single bed room incentives that take effect on or after October 1, 2014, shall no 
9.14 	longer be included in the payment rate for external fixed costs beginning on October 1 of 
9.15 	the first year not less than two years after their effective date.
9.16 	(j) The payment rate for external fixed costs shall be the sum of the amounts in 
9.17 	paragraphs (a) to (i).

9.18 	Sec. 16. Minnesota Statutes 2014, section 256B.441, subdivision 54, is amended to read:
9.19 		Subd. 54.Determination of total payment rates. In rate years when rates are 
9.20 	rebased, The total care-related per diem, other operating price, and external fixed per diem 
9.21 	for each facility shall be converted to payment rates by multiplying each by the forecast 
9.22 	increase in the CPI-U index from the midpoint of the reporting year to the midpoint of 
9.23 	the rate year. The total payment rate for a RUG's weight of 1.00 shall be the sum of 
9.24 	the total care-related payment rate, other operating payment rate, efficiency incentive,
9.25 	external fixed cost rate, and the property rate determined under section 256B.434. To 
9.26 	determine a total payment rate for each RUG's level, the total care-related payment rate 
9.27 	shall be divided into the direct care payment rate and the other care-related payment rate, 
9.28 	and the direct care payment rate multiplied by the RUG's weight for each RUG's level
9.29 	using the weights in subdivision 14.

9.30 	Sec. 17. Minnesota Statutes 2014, section 256B.441, subdivision 56, is amended to read:
9.31 		Subd. 56.Hold harmless. For the rate years year beginning October 1, 2008, to 
9.32 	October 1, 2016 2015, no nursing facility shall receive an operating cost payment rate less 
9.33 	than its prior system operating cost payment rate under section 256B.434. For rate years 
9.34 	beginning between October 1, 2009, and October 1, 2015, no nursing facility shall receive 
10.1 	an operating payment rate less than its operating payment rate in effect on September 30, 
10.2 	2009 as defined in subdivision 31. The comparison of operating payment rates under this 
10.3 	section shall be made for a RUG's rate with a weight of 1.00.

10.4 	Sec. 18. Minnesota Statutes 2014, section 256B.441, is amended by adding a 
10.5 	subdivision to read:
10.6 		Subd. 65.Nursing facility in Golden Valley. Effective with the rate year beginning 
10.7 	October 1, 2015, and all subsequent rate years, the operating payment rate for a facility 
10.8 	located in the city of Golden Valley at 3915 Golden Valley Road with 44 licensed 
10.9 	rehabilitation beds as of January 7, 2015, must be calculated without the application of 
10.10 	subdivisions 50 and 51.

10.11 	Sec. 19.  REPEALER.
 10.12 	Minnesota Statutes 2014, section 256B.441, subdivisions 14a, 19, 50a, 52, 55, 
10.13 	58, and 62, are repealed.