Office of the Revisor of Statutes
SF 2073
Introduction - 94th Legislature (2025 - 2026)
Posted on 03/04/2025 09:30 a.m.
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Introduction
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A bill for an act
relating to human services; modifying hospital payment rates; amending Minnesota
Statutes 2024, section 256.969, subdivision 2b.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1.
Minnesota Statutes 2024, section 256.969, subdivision 2b, is amended to read:
Subd. 2b.
Hospital payment rates.
(a) For discharges occurring on or after November
1, 2014, hospital inpatient services for hospitals located in Minnesota shall be paid according
to the following:
(1) critical access hospitals as defined by Medicare shall be paid using a cost-based
methodology;
(2) long-term hospitals as defined by Medicare shall be paid on a per diem methodology
under subdivision 25;
(3) rehabilitation hospitals or units of hospitals that are recognized as rehabilitation
distinct parts as defined by Medicare shall be paid according to the methodology under
subdivision 12; and
(4) all other hospitals shall be paid on a diagnosis-related group (DRG) methodology.
(b) For the period beginning January 1, 2011, through October 31, 2014, rates shall not
be rebased, except that a Minnesota long-term hospital shall be rebased effective January
1, 2011, based on its most recent Medicare cost report ending on or before September 1,
2008, with the provisions under subdivisions 9 and 23, based on the rates in effect on
December 31, 2010. For rate setting periods after November 1, 2014, in which the base
years are updated, a Minnesota long-term hospital's base year shall remain within the same
period as other hospitals.
(c) Effective for discharges occurring on and after November 1, 2014, payment rates
for hospital inpatient services provided by hospitals located in Minnesota or the local trade
area, except for the hospitals paid under the methodologies described in paragraph (a),
clauses (2) and (3), shall be rebased, incorporating cost and payment methodologies in a
manner similar to Medicare. The base year or years for the rates effective November 1,
2014, shall be calendar year 2012. The rebasing under this paragraph shall be budget neutral,
ensuring that the total aggregate payments under the rebased system are equal to the total
aggregate payments that were made for the same number and types of services in the base
year. Separate budget neutrality calculations shall be determined for payments made to
critical access hospitals and payments made to hospitals paid under the DRG system. Only
the rate increases or decreases under subdivision 3a or 3c that applied to the hospitals being
rebased during the entire base period shall be incorporated into the budget neutrality
calculation.
(d) For discharges occurring on or after November 1, 2014, through the next rebasing
that occurs, the rebased rates under paragraph (c) that apply to hospitals under paragraph
(a), clause (4), shall include adjustments to the projected rates that result in no greater than
a five percent increase or decrease from the base year payments for any hospital. Any
adjustments to the rates made by the commissioner under this paragraph and paragraph (e)
shall maintain budget neutrality as described in paragraph (c).
(e) For discharges occurring on or after November 1, 2014, the commissioner may make
additional adjustments to the rebased rates, and when evaluating whether additional
adjustments should be made, the commissioner shall consider the impact of the rates on the
following:
(1) pediatric services;
(2) behavioral health services;
(3) trauma services as defined by the National Uniform Billing Committee;
(4) transplant services;
(5) obstetric services, newborn services, and behavioral health services provided by
hospitals outside the seven-county metropolitan area;
(6) outlier admissions;
(7) low-volume providers; and
(8) services provided by small rural hospitals that are not critical access hospitals.
(f) Hospital payment rates established under paragraph (c) must incorporate the following:
(1) for hospitals paid under the DRG methodology, the base year payment rate per
admission is standardized by the applicable Medicare wage index and adjusted by the
hospital's disproportionate population adjustment;
(2) for critical access hospitals, payment rates for discharges between November 1, 2014,
and June 30, 2015, shall be set to the same rate of payment that applied for discharges on
October 31, 2014;
(3) the cost and charge data used to establish hospital payment rates must only reflect
inpatient services covered by medical assistance; and
(4) in determining hospital payment rates for discharges occurring on or after the rate
year beginning January 1, 2011, through December 31, 2012, the hospital payment rate per
discharge shall be based on the cost-finding methods and allowable costs of the Medicare
program in effect during the base year or years. In determining hospital payment rates for
discharges in subsequent base years, the per discharge rates shall be based on the cost-finding
methods and allowable costs of the Medicare program in effect during the base year or
years.
(g) The commissioner shall validate the rates effective November 1, 2014, by applying
the rates established under paragraph (c), and any adjustments made to the rates under
paragraph (d) or (e), to hospital claims paid in calendar year 2013 to determine whether the
total aggregate payments for the same number and types of services under the rebased rates
are equal to the total aggregate payments made during calendar year 2013.
(h) Effective for discharges occurring on or after July 1, deleted text begin 2017deleted text end new text begin 2025new text end , and deleted text begin every two yearsdeleted text end new text begin
annuallynew text end thereafter, payment rates under this section deleted text begin shalldeleted text end new text begin mustnew text end be rebased to reflect only
those changes in hospital costs between the existing base year or years and the next base
year or years. In any year that inpatient claims volume falls below the threshold required
to ensure a statistically valid sample of claims, the commissioner may combine claims data
from two consecutive years to serve as the base year. Years in which inpatient claims volume
is reduced or altered due to a pandemic or other public health emergency deleted text begin shalldeleted text end new text begin mustnew text end not be
used as a base year or part of a base year if the base year includes more than one year.
Changes in costs between base years deleted text begin shalldeleted text end new text begin mustnew text end be measured using deleted text begin the lower ofdeleted text end the hospital
cost index defined in subdivision 1, paragraph (a)deleted text begin , or the percentage change in the case mix
adjusted cost per claimdeleted text end . The commissioner shall establish the base year for each rebasing
period considering the most recent year or years for which filed Medicare cost reports are
availabledeleted text begin , deleted text end deleted text begin except that the base years for the rebasing effective July 1, 2023, are calendar
years 2018 and 2019deleted text end . The estimated change in the average payment per hospital discharge
resulting from a scheduled rebasing must be calculated and made available to the legislature
by January 15 of each year in which rebasing is scheduled to occur, and must include by
hospital the differential in payment rates compared to the individual hospital's costs.
(i) Effective for discharges occurring on or after July 1, deleted text begin 2015deleted text end new text begin 2025new text end , inpatient payment
rates for critical access hospitals located in Minnesota or the local trade area deleted text begin shall be
determined using a new cost-based methodology. The commissioner shall establish within
the methodology tiers of payment designed to promote efficiency and cost-effectiveness.
Payment rates for hospitals under this paragraph shall be set at a level that does not exceed
the total cost for critical access hospitals as reflected in base year cost reports. Until the
next rebasing that occurs, the new methodology shall result in no greater than a five percent
decrease from the base year payments for any hospital, except a hospital that had payments
that were greater than 100 percent of the hospital's costs in the base year shall have their
rate setdeleted text end new text begin mustnew text end equal deleted text begin todeleted text end 100 percent of costs in the base yeardeleted text begin . The rates paid for discharges
on and after July 1, 2016, covered under this paragraph shall be increased by the inflation
factordeleted text end new text begin inflated to the rate year using the hospital cost index definednew text end in subdivision 1,
paragraph (a). The new cost-based rate shall be the final rate and shall not be settled to
actual incurred costs. deleted text begin Hospitals shall be assigned a payment tier based on the following
criteria:
deleted text end
deleted text begin
(1) hospitals that had payments at or below 80 percent of their costs in the base year
shall have a rate set that equals 85 percent of their base year costs;
deleted text end
deleted text begin
(2) hospitals that had payments that were above 80 percent, up to and including 90
percent of their costs in the base year shall have a rate set that equals 95 percent of their
base year costs; and
deleted text end
deleted text begin
(3) hospitals that had payments that were above 90 percent of their costs in the base year
shall have a rate set that equals 100 percent of their base year costs.
deleted text end
deleted text begin
(j) The commissioner may refine the payment tiers and criteria for critical access hospitals
to coincide with the next rebasing under paragraph (h). The factors used to develop the new
methodology may include, but are not limited to:
deleted text end
deleted text begin
(1) the ratio between the hospital's costs for treating medical assistance patients and the
hospital's charges to the medical assistance program;
deleted text end
deleted text begin
(2) the ratio between the hospital's costs for treating medical assistance patients and the
hospital's payments received from the medical assistance program for the care of medical
assistance patients;
deleted text end
deleted text begin
(3) the ratio between the hospital's charges to the medical assistance program and the
hospital's payments received from the medical assistance program for the care of medical
assistance patients;
deleted text end
deleted text begin
(4) the statewide average increases in the ratios identified in clauses (1), (2), and (3);
deleted text end
deleted text begin
(5) the proportion of that hospital's costs that are administrative and trends in
administrative costs; and
deleted text end
deleted text begin
(6) geographic location.
deleted text end
deleted text begin (k)deleted text end new text begin (j)new text end Subject to subdivision 2g, effective for discharges occurring on or after January
1, 2024, the rates paid to hospitals described in paragraph (a), clauses (2) to (4), must include
a rate factor specific to each hospital that qualifies for a medical education and research
cost distribution under section 62J.692, subdivision 4, paragraph (a).