1.1 	A bill for an act
1.2 	relating to human services; imposing an assessment on hospitals; requiring directed 
1.3 	payments to hospitals in the medical assistance program; requiring reports;
1.4 	amending Minnesota Statutes 2024, sections 256.9657, by adding a subdivision; 
1.5 	256B.1973, by adding a subdivision; proposing coding for new law in Minnesota 
1.6 	Statutes, chapter 256B.
1.7 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.8 	Section 1. Minnesota Statutes 2024, section 256.9657, is amended by adding a subdivision 
1.9 	to read:
1.10 		Subd. 2b.Hospital assessment. (a) For purposes of this subdivision, the following terms 
1.11 	have the meanings given:
1.12 	(1) "eligible hospital" means a hospital that participates in Minnesota's medical assistance 
1.13 	program;
1.14 	(2) "net inpatient revenue" means the value stated on line ... on worksheet ..., part ..., of 
1.15 	the hospital's most recent Medicare cost report filed and showing in the Healthcare Cost 
1.16 	Report Information System (HCRIS) as of October 1 of each year; and
1.17 	(3) "net outpatient revenue" means the value stated on line ... on worksheet ..., part ..., 
1.18 	of the hospital's most recent Medicare cost report filed and showing in HCRIS as of October 
1.19 	1 of each year.
1.20 	(b) Subject to paragraphs (k) and (l), each eligible hospital must pay to the hospital 
1.21 	directed payment program account assessments, with an aggregate annual amount equal to 
1.22 	the sum of the following:
1.23 	(1) ... percent of the hospital's net inpatient revenue; and
2.1 	(2) ... percent of the hospital's net outpatient revenue.
2.2 	(c) Eligible hospitals must pay the annual assessment amount under paragraph (b) to the 
2.3 	commissioner by paying four equal, quarterly assessments. Eligible hospitals must pay the 
2.4 	quarterly assessments by January 1, April 1, July 1, and October 1 each year. Assessments 
2.5 	must be paid in the form and manner specified by the commissioner.
2.6 	(d) The commissioner must provide eligible hospitals with an invoice by December 1 
2.7 	for the assessment due January 1, March 1 for the assessment due April 1, June 1 for the 
2.8 	assessment due July 1, and September 1 for the assessment due October 1 each year.
2.9 	(e) The commissioner must notify each eligible hospital of its estimated annual assessment 
2.10 	amount for the subsequent calendar year by October 15 each year.
2.11 	(f) If any of the dates for assessments or invoices in paragraphs (c) to (e) falls on a 
2.12 	holiday, the applicable date is the next business day.
2.13 	(g) A hospital is not required to pay an assessment under this subdivision until the start 
2.14 	of the first full fiscal year the hospital is an eligible hospital. A hospital that has merged 
2.15 	with another hospital must have the hospital's assessment revised at the start of the first full 
2.16 	fiscal year after the merger is complete. A closed hospital is retroactively responsible for 
2.17 	assessments owed for services provided through the final date of operations.
2.18 	(h) If the commissioner determines that a hospital has underpaid or overpaid an 
2.19 	assessment, the commissioner must notify the hospital of the unpaid assessment or of any 
2.20 	refund due. A hospital that disputes the amount of an assessment by the commissioner may 
2.21 	dispute the assessment utilizing any remedy available in law related to provider payments 
2.22 	in medical assistance.
2.23 	(i) Revenue from an assessment under this subdivision must only be used by the 
2.24 	commissioner to pay the nonfederal share of the directed payment program under section 
2.25 	256B.1974.
2.26 	(j) The commissioner is prohibited from collecting any assessment under this subdivision 
2.27 	during any period of time when:
2.28 	(1) federal financial participation is unavailable or disallowed; or
2.29 	(2) a directed payment under section 256B.1974 is not approved by the Centers for 
2.30 	Medicare and Medicaid Services.
3.1 	(k) The commissioner must make the following discounts or exemptions from the 
3.2 	assessment under this subdivision as necessary to achieve federal approval of the assessment 
3.3 	in this section:
3.4 	(1) a long-term care hospital, as defined in Code of Federal Regulations, title 42, section 
3.5 	412.23, paragraph (e);
3.6 	(2) each critical access hospital or independent hospital in rural Minnesota paid under 
3.7 	the Medicare prospective payment system;
3.8 	(3) any hospital in Minnesota designated as a children's hospital under Code of Federal 
3.9 	Regulations, title 42, section 412.23, paragraph (d);
3.10 	(4) federal Indian Health Service facilities;
3.11 	(5) state-owned or state-operated regional treatment centers and all state-operated services; 
3.12 	and
3.13 	(6) any hospital that is a nonstate government teaching hospital with high medical 
3.14 	assistance utilization and a level 1 trauma center.
3.15 	(l) The commissioner must discount an assessment as necessary to ensure that no single 
3.16 	hospital system is responsible for greater than ... percent of the total assessments annually 
3.17 	collected statewide.
3.18 	(m) The commissioner must reduce the assessment on a uniform percentage basis across 
3.19 	eligible hospitals on which the assessment is imposed, such that the aggregate amount 
3.20 	collected from hospitals under this subdivision does not exceed the total amount needed for 
3.21 	the annual nonfederal share of the directed payments authorized by section 256B.1974.
3.22 	(n) Hospitals subject to the assessment under this subdivision must submit to the 
3.23 	commissioner, in the form and manner specified by the commissioner and annually agreed 
3.24 	to in writing by the Minnesota Hospital Association, all documentation necessary to 
3.25 	determine the assessment amounts under this subdivision.

3.26 	EFFECTIVE DATE. (a) This section is effective the later of January 1, 2026, or federal 
3.27 	approval of all of the following:
3.28 	(1) this section; and
3.29 	(2) the amendments in this act to Minnesota Statutes, sections 256B.1973 and 256B.1974.
3.30 	(b) The commissioner of human services shall notify the revisor of statutes when federal 
3.31 	approval for all amendments set forth in paragraph (a) is obtained.

4.1 	Sec. 2. Minnesota Statutes 2024, section 256B.1973, is amended by adding a subdivision 
4.2 	to read:
4.3 		Subd. 9.Interaction with other directed payments. An eligible provider under 
4.4 	subdivision 3 may participate in the hospital directed payment program under section 
4.5 	256B.1974. A provider participating in the hospital directed payment program must not 
4.6 	receive a directed payment under this section for any provider classes paid via the hospital 
4.7 	directed payment program. A hospital subject to this section must notify the commissioner 
4.8 	in writing no later than 30 days after enactment of this subdivision of its intention to 
4.9 	participate in the hospital directed payment program under section 256B.1974.

4.10 	EFFECTIVE DATE. (a) This section is effective on the later of January 1, 2026, or 
4.11 	federal approval of all of the following:
4.12 	(1) this section;
4.13 	(2) the amendments in this act to add Minnesota Statutes, section 256.9657, subdivision 
4.14 	2b; and
4.15 	(3) the amendments in this act to Minnesota Statutes, section 256B.1974.
4.16 	(b) The commissioner of human services shall notify the revisor of statutes when federal 
4.17 	approval for all amendments set forth in paragraph (a) is obtained.

4.18 	Sec. 3. [256B.1974] HOSPITAL DIRECTED PAYMENT PROGRAM.
4.19 		Subdivision 1.Definitions. (a) For the purposes of this section, the following terms have 
4.20 	the meanings given.
4.21 	(b) "Health plan" means a managed care plan or county-based purchasing plan that is 
4.22 	under contract with the commissioner to deliver services to medical assistance enrollees 
4.23 	under section 256B.69.
4.24 	(c) "Hospital" means a hospital licensed under section 144.50.
4.25 		Subd. 2.Federal approval required. The hospital directed payment program is 
4.26 	contingent on federal approval and must conform with the requirements for permissible 
4.27 	directed managed care organization expenditures under section 256B.6928, subdivision 5.
4.28 		Subd. 3.Commissioner's duties; state-directed fee schedule requirement. (a) For 
4.29 	each federally approved directed payment program that is a state-directed fee schedule 
4.30 	requirement the commissioner must determine a quarterly payment amount to be submitted 
4.31 	by a hospital to a health plan. The commissioner must determine the quarterly payment 
4.32 	amount using the average commercial payer rate, or using another method acceptable to 
5.1 	the Centers for Medicare and Medicaid Services if the average commercial payer rate is not 
5.2 	approved, minus the amount necessary for the plan to satisfy assessment liabilities under 
5.3 	sections 256.9657 and 297I.05 attributable to the directed payment program. The 
5.4 	commissioner must ensure that the application of the quarterly payment amounts maximizes 
5.5 	the allowable directed payments and does not result in payments exceeding federal limits. 
5.6 	The commissioner may use an annual settle-up process. The directed payment program 
5.7 	must be specific to each health plan and prospectively incorporated into capitation payments 
5.8 	for that plan.
5.9 	(b) For each federally approved directed payment program that is a state-directed fee 
5.10 	schedule requirement, the commissioner must develop a plan for the initial implementation 
5.11 	of the state-directed fee schedule requirement to ensure that hospitals receive the entire 
5.12 	permissible value of the federally approved directed payment. If federal approval of a 
5.13 	directed payment under this subdivision is retroactive, the commissioner must make a 
5.14 	onetime pro rata increase to the quarterly payment amount and the initial payments to include 
5.15 	claims submitted between the retroactive federal approval date and the period captured by 
5.16 	the initial payments.
5.17 	(c) Directed payments under this section must only be used to supplement, and not 
5.18 	supplant, medical assistance reimbursement to hospitals. The directed payment program 
5.19 	must not modify, reduce, or offset the medical assistance payment rates determined for each 
5.20 	hospital as required by section 256.969.
5.21 	(d) The commissioner must require health plans to make quarterly directed payments 
5.22 	according to this section.
5.23 	(e) Health plans must make quarterly directed payments using electronic funds transfers, 
5.24 	if the hospital provides the information necessary to process such transfers, and in accordance 
5.25 	with directions provided by the commissioner. The electronic funds transfer under this 
5.26 	paragraph must occur within five business days of the date the commissioner issued sufficient 
5.27 	payments to the health plan to make the directed payments according to this section. If funds 
5.28 	are not paid to the health plans by the commissioner by electronic funds transfer, any directed 
5.29 	payment must be made within seven business days of the date the money was actually 
5.30 	received by the health plan. The health plan must be considered to have paid the directed 
5.31 	payments when the payment remittance number is generated, or on the date the health plan 
5.32 	sends the check to the hospital if electronic money transfer information is not supplied.
5.33 	(f) If a health plan is late in paying a directed payment as required under this section, 
5.34 	including any extensions granted by the commissioner, the health plan must pay a penalty, 
6.1 	unless waived by the commissioner for reasonable cause, to the commissioner. The amount 
6.2 	of the penalty is equal to five percent of the unpaid amount of the directed payment plus 
6.3 	five percent of the portion remaining unpaid on the last day of each 30 day period thereafter.
6.4 	(g) Payments to health plans that would be paid consistent with actuarial certification 
6.5 	and enrollment in the absence of the increased capitation payments under this section must 
6.6 	not be reduced as a result of this section.
6.7 	(h) The commissioner must publish all directed payments owed to each hospital from 
6.8 	each health plan on the Department of Human Services' website for at least two years. All 
6.9 	calculations and reports must be posted no later than the first day of the quarter for which 
6.10 	the payments are to be issued.
6.11 	(i) By December 1 each year, the commissioner must notify each hospital of any changes 
6.12 	to the payment methodologies in this section, including but not limited to changes in the 
6.13 	directed payment rates, the aggregate directed payment amount for all hospitals, and the 
6.14 	hospital's directed payment amount for the upcoming calendar year.
6.15 	(j) The commissioner must distribute payments required under this section for each 
6.16 	hospital within 30 days of a quarterly assessment under section 256.9657, subdivision 2b, 
6.17 	being received. The commissioner must pay the directed payments to health plans under 
6.18 	contract no later than January 1, April 1, July 1, and October 1 each year.
6.19 	(k) A hospital is not entitled to payments under this section until the start of the first full 
6.20 	fiscal year it is an eligible hospital. A hospital that has merged with another hospital must 
6.21 	have its payments under this section revised at the start of the first full fiscal year after the 
6.22 	merger is complete. A closed hospital is entitled to the payments under this section for 
6.23 	services provided through the final date of operations.
6.24 		Subd. 4.Health plan duties; submission of claims. Each health plan must submit to 
6.25 	the commissioner, in accordance with its contract with the commissioner to serve as a 
6.26 	managed care organization in medical assistance, payment information for each claim paid 
6.27 	to a hospital for services provided to a medical assistance enrollee. Health plans must allow 
6.28 	each hospital to review the health plan's own paid claims detail to enable proper validation 
6.29 	that the medical assistance managed care claims volume and content is consistent with the 
6.30 	hospital's internal records. To support the validation process for the directed payment 
6.31 	program, health plans must permit the commissioner to share inpatient and outpatient 
6.32 	claims-level details with hospitals identifying only those claims where the prepaid medical 
6.33 	assistance program under section 256B.69 is the payer source. Hospitals must provide notice 
6.34 	of discrepancies in claims paid to the commissioner in a form determined by the 
7.1 	commissioner. The commissioner is authorized to determine the final disposition of the 
7.2 	validation process for disputed claims.
7.3 		Subd. 5.Health plan duties; directed payment add-on. (a) Each health plan must 
7.4 	make, in accordance with its contract with the commissioner to serve as a managed care 
7.5 	organization in medical assistance, a directed payment to each hospital. The amount of the 
7.6 	directed payment to the hospital must be equal to the payment amounts the plan received 
7.7 	from the commissioner for such hospital.
7.8 	(b) Health plans are prohibited from:
7.9 	(1) setting, establishing, or negotiating reimbursement rates with a hospital in a manner 
7.10 	that directly or indirectly takes into account a directed payment that a hospital receives 
7.11 	under this section;
7.12 	(2) unnecessarily delaying a directed payment to a hospital; or
7.13 	(3) recouping or offsetting a directed payment for any reason, except as expressly 
7.14 	authorized by the commissioner.
7.15 		Subd. 6.Hospital duties; quarterly supplemental directed payment add-on. (a) A 
7.16 	hospital receiving a directed payment under this section is prohibited from:
7.17 	(1) setting, establishing, or negotiating reimbursement rates with a managed care 
7.18 	organization in a manner that directly or indirectly takes into account a directed payment 
7.19 	that a hospital receives under this section; or
7.20 	(2) directly passing on the cost of an assessment to patients or nonmedical assistance 
7.21 	payers, including as a fee or rate increase.
7.22 	(b) A hospital that violates this subdivision is prohibited from receiving a directed 
7.23 	payment under this section for the remainder of the rate year. This subdivision does not 
7.24 	prohibit a hospital from negotiating with a payer for a rate increase.
7.25 	(c) Any hospital receiving a directed payment under this section must meet the 
7.26 	commissioner's standards for directed payments as described in subdivision 7.
7.27 		Subd. 7.State minimum policy goals established. (a) The effect of the directed 
7.28 	payments under this section must align with the state's policy goals for medical assistance 
7.29 	enrollees. The directed payments must be used to maintain quality and access to a full range 
7.30 	of health care delivery mechanisms for medical assistance enrollees.
8.1 	(b) The commissioner, in consultation with the Minnesota Hospital Association, must 
8.2 	submit to the Centers for Medicare and Medicaid Services a methodology to regularly 
8.3 	measure access to care and the achievement of state policy goals described in this subdivision.
8.4 		Subd. 8.Administrative review. Before making the payments required under this 
8.5 	section, and on at least an annual basis, the commissioner must consult with and provide 
8.6 	for review of the payment amounts by a permanent select committee established by the 
8.7 	Minnesota Hospital Association. Any data or information reviewed by members of the 
8.8 	committee are data not on individuals, as defined in section 13.02. The committee's members 
8.9 	may not include any current employee or paid consultant of any hospital.

8.10 	EFFECTIVE DATE. (a) This section is effective the later of January 1, 2026, or federal 
8.11 	approval for all of the following:
8.12 	(1) the amendments in this act to add Minnesota Statutes, section 256.9657, subdivision 
8.13 	2b; and
8.14 	(2) the amendments in this act to this section.
8.15 	(b) The commissioner of human services shall notify the revisor of statutes when federal 
8.16 	approval for all amendments set forth in paragraph (a) is obtained.

8.17 	Sec. 4. [256B.1975] HOSPITAL DIRECTED PAYMENT PROGRAM ACCOUNT.
8.18 		Subdivision 1.Account established; appropriation. (a) The hospital directed payment 
8.19 	program account is created in the special revenue fund in the state treasury.
8.20 	(b) Money in the account, including interest earned, is annually appropriated to the 
8.21 	commissioner for the purposes specified in section 256B.1974.
8.22 	(c) Transfers from this account to another fund are prohibited.
8.23 		Subd. 2.Reports to the legislature. By January 15, 2027, and each January 15 thereafter, 
8.24 	the commissioner must submit a report to the chairs and ranking minority members of the 
8.25 	legislative committees with jurisdiction over health and human services policy and finance 
8.26 	that details the activities and uses of money in the hospital directed payment program 
8.27 	account, including the metrics and outcomes of the policy goals established by section 
8.28 	256B.1974, subdivision 7.

8.29 	EFFECTIVE DATE. This section is effective on the later of January 1, 2026, or federal 
8.30 	approval of the amendments in this act to add Minnesota Statutes, section 256.9657, 
8.31 	subdivision 2b. The commissioner of human services shall notify the revisor of statutes 
8.32 	when federal approval is obtained.

9.1 	Sec. 5. IMPLEMENTATION OF HOSPITAL ASSESSMENT AND DIRECTED 
9.2 	PAYMENT PROGRAM.
 9.3 	(a) By October 1, 2025, the commissioner of human services must begin all necessary 
9.4 	claims analysis to calculate the assessment and payments required under Minnesota Statutes, 
9.5 	section 256.9657, subdivision 2b, and the hospital directed payment program described in 
9.6 	Minnesota Statutes, section 256B.1974.
9.7 	(b) The commissioner of human services, in consultation with the Minnesota Hospital 
9.8 	Association, must submit to the Centers for Medicare and Medicaid Services a request for 
9.9 	federal approval to implement the hospital assessment described in Minnesota Statutes, 
9.10 	section 256.9657, subdivision 2b, and the hospital directed payment program under 
9.11 	Minnesota Statutes, section 256B.1974. At least 60 days before submitting the request for 
9.12 	approval, the commissioner must make available to the public the draft assessment 
9.13 	requirements, draft directed payment details, and an estimate of each assessment amount 
9.14 	for each hospital without an exemption from the assessment pursuant to Minnesota Statutes, 
9.15 	section 256.9657, subdivision 2b, paragraph (k).
9.16 	(c) During the design and prior to submission of the request for approval under paragraph 
9.17 	(b), the commissioner of human services must consult with the Minnesota Hospital 
9.18 	Association and any hospitals without an exemption from the assessment pursuant to 
9.19 	Minnesota Statutes, section 256.9657, subdivision 2b, paragraph (k), and that are not 
9.20 	members of the Minnesota Hospital Association.
9.21 	(d) If federal approval is received for the request under paragraph (b), the commissioner 
9.22 	of human services must provide at least 30 days of public posting and review of the federally 
9.23 	approved terms and conditions for the assessment and the directed payment program prior 
9.24 	to any assessment under Minnesota Statutes, section 256.9657, subdivision 2b, becoming 
9.25 	due from a hospital.

9.26 	EFFECTIVE DATE. This section is effective the day following final enactment.