SF 2413

1st Engrossment - 94th Legislature (2025 - 2026)

Posted on 07/09/2025 09:11 a.m.

A bill for an act
relating to human services; imposing an assessment on hospitals; requiring directed
payments to hospitals in the medical assistance program; requiring reports;
amending Minnesota Statutes 2024, sections 256.9657, by adding a subdivision;
256B.1973, by adding a subdivision; proposing coding for new law in Minnesota
Statutes, chapter 256B.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2024, section 256.9657, is amended by adding a subdivision
to read:

new text begin Subd. 2b. new text end

new text begin Hospital assessment. new text end

new text begin (a) For purposes of this subdivision, the following terms
have the meanings given:
new text end

new text begin (1) "eligible hospital" means a hospital that participates in Minnesota's medical assistance
program;
new text end

new text begin (2) "net inpatient revenue" means the value stated on line ... on worksheet ..., part ..., of
the hospital's most recent Medicare cost report filed and showing in the Healthcare Cost
Report Information System (HCRIS) as of October 1 of each year; and
new text end

new text begin (3) "net outpatient revenue" means the value stated on line ... on worksheet ..., part ...,
of the hospital's most recent Medicare cost report filed and showing in HCRIS as of October
1 of each year.
new text end

new text begin (b) Subject to paragraphs (k) and (l), each eligible hospital must pay to the hospital
directed payment program account assessments, with an aggregate annual amount equal to
the sum of the following:
new text end

new text begin (1) ... percent of the hospital's net inpatient revenue; and
new text end

new text begin (2) ... percent of the hospital's net outpatient revenue.
new text end

new text begin (c) Eligible hospitals must pay the annual assessment amount under paragraph (b) to the
commissioner by paying four equal, quarterly assessments. Eligible hospitals must pay the
quarterly assessments by January 1, April 1, July 1, and October 1 each year. Assessments
must be paid in the form and manner specified by the commissioner.
new text end

new text begin (d) The commissioner must provide eligible hospitals with an invoice by December 1
for the assessment due January 1, March 1 for the assessment due April 1, June 1 for the
assessment due July 1, and September 1 for the assessment due October 1 each year.
new text end

new text begin (e) The commissioner must notify each eligible hospital of its estimated annual assessment
amount for the subsequent calendar year by October 15 each year.
new text end

new text begin (f) If any of the dates for assessments or invoices in paragraphs (c) to (e) falls on a
holiday, the applicable date is the next business day.
new text end

new text begin (g) A hospital is not required to pay an assessment under this subdivision until the start
of the first full fiscal year the hospital is an eligible hospital. A hospital that has merged
with another hospital must have the hospital's assessment revised at the start of the first full
fiscal year after the merger is complete. A closed hospital is retroactively responsible for
assessments owed for services provided through the final date of operations.
new text end

new text begin (h) If the commissioner determines that a hospital has underpaid or overpaid an
assessment, the commissioner must notify the hospital of the unpaid assessment or of any
refund due. A hospital that disputes the amount of an assessment by the commissioner may
dispute the assessment utilizing any remedy available in law related to provider payments
in medical assistance.
new text end

new text begin (i) Revenue from an assessment under this subdivision must only be used by the
commissioner to pay the nonfederal share of the directed payment program under section
256B.1974.
new text end

new text begin (j) The commissioner is prohibited from collecting any assessment under this subdivision
during any period of time when:
new text end

new text begin (1) federal financial participation is unavailable or disallowed; or
new text end

new text begin (2) a directed payment under section 256B.1974 is not approved by the Centers for
Medicare and Medicaid Services.
new text end

new text begin (k) The commissioner must make the following discounts or exemptions from the
assessment under this subdivision as necessary to achieve federal approval of the assessment
in this section:
new text end

new text begin (1) a long-term care hospital, as defined in Code of Federal Regulations, title 42, section
412.23, paragraph (e);
new text end

new text begin (2) each critical access hospital or independent hospital in rural Minnesota paid under
the Medicare prospective payment system;
new text end

new text begin (3) any hospital in Minnesota designated as a children's hospital under Code of Federal
Regulations, title 42, section 412.23, paragraph (d);
new text end

new text begin (4) federal Indian Health Service facilities;
new text end

new text begin (5) state-owned or state-operated regional treatment centers and all state-operated services;
and
new text end

new text begin (6) any hospital that is a nonstate government teaching hospital with high medical
assistance utilization and a level 1 trauma center.
new text end

new text begin (l) The commissioner must discount an assessment as necessary to ensure that no single
hospital system is responsible for greater than ... percent of the total assessments annually
collected statewide.
new text end

new text begin (m) The commissioner must reduce the assessment on a uniform percentage basis across
eligible hospitals on which the assessment is imposed, such that the aggregate amount
collected from hospitals under this subdivision does not exceed the total amount needed for
the annual nonfederal share of the directed payments authorized by section 256B.1974.
new text end

new text begin (n) Hospitals subject to the assessment under this subdivision must submit to the
commissioner, in the form and manner specified by the commissioner and annually agreed
to in writing by the Minnesota Hospital Association, all documentation necessary to
determine the assessment amounts under this subdivision.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin (a) This section is effective the later of January 1, 2026, or federal
approval of all of the following:
new text end

new text begin (1) this section; and
new text end

new text begin (2) the amendments in this act to Minnesota Statutes, sections 256B.1973 and 256B.1974.
new text end

new text begin (b) The commissioner of human services shall notify the revisor of statutes when federal
approval for all amendments set forth in paragraph (a) is obtained.
new text end

Sec. 2.

Minnesota Statutes 2024, section 256B.1973, is amended by adding a subdivision
to read:

new text begin Subd. 9. new text end

new text begin Interaction with other directed payments. new text end

new text begin An eligible provider under
subdivision 3 may participate in the hospital directed payment program under section
256B.1974. A provider participating in the hospital directed payment program must not
receive a directed payment under this section for any provider classes paid via the hospital
directed payment program. A hospital subject to this section must notify the commissioner
in writing no later than 30 days after enactment of this subdivision of its intention to
participate in the hospital directed payment program under section 256B.1974.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin (a) This section is effective on the later of January 1, 2026, or
federal approval of all of the following:
new text end

new text begin (1) this section;
new text end

new text begin (2) the amendments in this act to add Minnesota Statutes, section 256.9657, subdivision
2b; and
new text end

new text begin (3) the amendments in this act to Minnesota Statutes, section 256B.1974.
new text end

new text begin (b) The commissioner of human services shall notify the revisor of statutes when federal
approval for all amendments set forth in paragraph (a) is obtained.
new text end

Sec. 3.

new text begin [256B.1974] HOSPITAL DIRECTED PAYMENT PROGRAM.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For the purposes of this section, the following terms have
the meanings given.
new text end

new text begin (b) "Health plan" means a managed care plan or county-based purchasing plan that is
under contract with the commissioner to deliver services to medical assistance enrollees
under section 256B.69.
new text end

new text begin (c) "Hospital" means a hospital licensed under section 144.50.
new text end

new text begin Subd. 2. new text end

new text begin Federal approval required. new text end

new text begin The hospital directed payment program is
contingent on federal approval and must conform with the requirements for permissible
directed managed care organization expenditures under section 256B.6928, subdivision 5.
new text end

new text begin Subd. 3. new text end

new text begin Commissioner's duties; state-directed fee schedule requirement. new text end

new text begin (a) For
each federally approved directed payment program that is a state-directed fee schedule
requirement the commissioner must determine a quarterly payment amount to be submitted
by a hospital to a health plan. The commissioner must determine the quarterly payment
amount using the average commercial payer rate, or using another method acceptable to
the Centers for Medicare and Medicaid Services if the average commercial payer rate is not
approved, minus the amount necessary for the plan to satisfy assessment liabilities under
sections 256.9657 and 297I.05 attributable to the directed payment program. The
commissioner must ensure that the application of the quarterly payment amounts maximizes
the allowable directed payments and does not result in payments exceeding federal limits.
The commissioner may use an annual settle-up process. The directed payment program
must be specific to each health plan and prospectively incorporated into capitation payments
for that plan.
new text end

new text begin (b) For each federally approved directed payment program that is a state-directed fee
schedule requirement, the commissioner must develop a plan for the initial implementation
of the state-directed fee schedule requirement to ensure that hospitals receive the entire
permissible value of the federally approved directed payment. If federal approval of a
directed payment under this subdivision is retroactive, the commissioner must make a
onetime pro rata increase to the quarterly payment amount and the initial payments to include
claims submitted between the retroactive federal approval date and the period captured by
the initial payments.
new text end

new text begin (c) Directed payments under this section must only be used to supplement, and not
supplant, medical assistance reimbursement to hospitals. The directed payment program
must not modify, reduce, or offset the medical assistance payment rates determined for each
hospital as required by section 256.969.
new text end

new text begin (d) The commissioner must require health plans to make quarterly directed payments
according to this section.
new text end

new text begin (e) Health plans must make quarterly directed payments using electronic funds transfers,
if the hospital provides the information necessary to process such transfers, and in accordance
with directions provided by the commissioner. The electronic funds transfer under this
paragraph must occur within five business days of the date the commissioner issued sufficient
payments to the health plan to make the directed payments according to this section. If funds
are not paid to the health plans by the commissioner by electronic funds transfer, any directed
payment must be made within seven business days of the date the money was actually
received by the health plan. The health plan must be considered to have paid the directed
payments when the payment remittance number is generated, or on the date the health plan
sends the check to the hospital if electronic money transfer information is not supplied.
new text end

new text begin (f) If a health plan is late in paying a directed payment as required under this section,
including any extensions granted by the commissioner, the health plan must pay a penalty,
unless waived by the commissioner for reasonable cause, to the commissioner. The amount
of the penalty is equal to five percent of the unpaid amount of the directed payment plus
five percent of the portion remaining unpaid on the last day of each 30 day period thereafter.
new text end

new text begin (g) Payments to health plans that would be paid consistent with actuarial certification
and enrollment in the absence of the increased capitation payments under this section must
not be reduced as a result of this section.
new text end

new text begin (h) The commissioner must publish all directed payments owed to each hospital from
each health plan on the Department of Human Services' website for at least two years. All
calculations and reports must be posted no later than the first day of the quarter for which
the payments are to be issued.
new text end

new text begin (i) By December 1 each year, the commissioner must notify each hospital of any changes
to the payment methodologies in this section, including but not limited to changes in the
directed payment rates, the aggregate directed payment amount for all hospitals, and the
hospital's directed payment amount for the upcoming calendar year.
new text end

new text begin (j) The commissioner must distribute payments required under this section for each
hospital within 30 days of a quarterly assessment under section 256.9657, subdivision 2b,
being received. The commissioner must pay the directed payments to health plans under
contract no later than January 1, April 1, July 1, and October 1 each year.
new text end

new text begin (k) A hospital is not entitled to payments under this section until the start of the first full
fiscal year it is an eligible hospital. A hospital that has merged with another hospital must
have its payments under this section revised at the start of the first full fiscal year after the
merger is complete. A closed hospital is entitled to the payments under this section for
services provided through the final date of operations.
new text end

new text begin Subd. 4. new text end

new text begin Health plan duties; submission of claims. new text end

new text begin Each health plan must submit to
the commissioner, in accordance with its contract with the commissioner to serve as a
managed care organization in medical assistance, payment information for each claim paid
to a hospital for services provided to a medical assistance enrollee. Health plans must allow
each hospital to review the health plan's own paid claims detail to enable proper validation
that the medical assistance managed care claims volume and content is consistent with the
hospital's internal records. To support the validation process for the directed payment
program, health plans must permit the commissioner to share inpatient and outpatient
claims-level details with hospitals identifying only those claims where the prepaid medical
assistance program under section 256B.69 is the payer source. Hospitals must provide notice
of discrepancies in claims paid to the commissioner in a form determined by the
commissioner. The commissioner is authorized to determine the final disposition of the
validation process for disputed claims.
new text end

new text begin Subd. 5. new text end

new text begin Health plan duties; directed payment add-on. new text end

new text begin (a) Each health plan must
make, in accordance with its contract with the commissioner to serve as a managed care
organization in medical assistance, a directed payment to each hospital. The amount of the
directed payment to the hospital must be equal to the payment amounts the plan received
from the commissioner for such hospital.
new text end

new text begin (b) Health plans are prohibited from:
new text end

new text begin (1) setting, establishing, or negotiating reimbursement rates with a hospital in a manner
that directly or indirectly takes into account a directed payment that a hospital receives
under this section;
new text end

new text begin (2) unnecessarily delaying a directed payment to a hospital; or
new text end

new text begin (3) recouping or offsetting a directed payment for any reason, except as expressly
authorized by the commissioner.
new text end

new text begin Subd. 6. new text end

new text begin Hospital duties; quarterly supplemental directed payment add-on. new text end

new text begin (a) A
hospital receiving a directed payment under this section is prohibited from:
new text end

new text begin (1) setting, establishing, or negotiating reimbursement rates with a managed care
organization in a manner that directly or indirectly takes into account a directed payment
that a hospital receives under this section; or
new text end

new text begin (2) directly passing on the cost of an assessment to patients or nonmedical assistance
payers, including as a fee or rate increase.
new text end

new text begin (b) A hospital that violates this subdivision is prohibited from receiving a directed
payment under this section for the remainder of the rate year. This subdivision does not
prohibit a hospital from negotiating with a payer for a rate increase.
new text end

new text begin (c) Any hospital receiving a directed payment under this section must meet the
commissioner's standards for directed payments as described in subdivision 7.
new text end

new text begin Subd. 7. new text end

new text begin State minimum policy goals established. new text end

new text begin (a) The effect of the directed
payments under this section must align with the state's policy goals for medical assistance
enrollees. The directed payments must be used to maintain quality and access to a full range
of health care delivery mechanisms for medical assistance enrollees.
new text end

new text begin (b) The commissioner, in consultation with the Minnesota Hospital Association, must
submit to the Centers for Medicare and Medicaid Services a methodology to regularly
measure access to care and the achievement of state policy goals described in this subdivision.
new text end

new text begin Subd. 8. new text end

new text begin Administrative review. new text end

new text begin Before making the payments required under this
section, and on at least an annual basis, the commissioner must consult with and provide
for review of the payment amounts by a permanent select committee established by the
Minnesota Hospital Association. Any data or information reviewed by members of the
committee are data not on individuals, as defined in section 13.02. The committee's members
may not include any current employee or paid consultant of any hospital.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin (a) This section is effective the later of January 1, 2026, or federal
approval for all of the following:
new text end

new text begin (1) the amendments in this act to add Minnesota Statutes, section 256.9657, subdivision
2b; and
new text end

new text begin (2) the amendments in this act to this section.
new text end

new text begin (b) The commissioner of human services shall notify the revisor of statutes when federal
approval for all amendments set forth in paragraph (a) is obtained.
new text end

Sec. 4.

new text begin [256B.1975] HOSPITAL DIRECTED PAYMENT PROGRAM ACCOUNT.
new text end

new text begin Subdivision 1. new text end

new text begin Account established; appropriation. new text end

new text begin (a) The hospital directed payment
program account is created in the special revenue fund in the state treasury.
new text end

new text begin (b) Money in the account, including interest earned, is annually appropriated to the
commissioner for the purposes specified in section 256B.1974.
new text end

new text begin (c) Transfers from this account to another fund are prohibited.
new text end

new text begin Subd. 2. new text end

new text begin Reports to the legislature. new text end

new text begin By January 15, 2027, and each January 15 thereafter,
the commissioner must submit a report to the chairs and ranking minority members of the
legislative committees with jurisdiction over health and human services policy and finance
that details the activities and uses of money in the hospital directed payment program
account, including the metrics and outcomes of the policy goals established by section
256B.1974, subdivision 7.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective on the later of January 1, 2026, or federal
approval of the amendments in this act to add Minnesota Statutes, section 256.9657,
subdivision 2b. The commissioner of human services shall notify the revisor of statutes
when federal approval is obtained.
new text end

Sec. 5. new text begin IMPLEMENTATION OF HOSPITAL ASSESSMENT AND DIRECTED
PAYMENT PROGRAM.
new text end

new text begin (a) By October 1, 2025, the commissioner of human services must begin all necessary
claims analysis to calculate the assessment and payments required under Minnesota Statutes,
section 256.9657, subdivision 2b, and the hospital directed payment program described in
Minnesota Statutes, section 256B.1974.
new text end

new text begin (b) The commissioner of human services, in consultation with the Minnesota Hospital
Association, must submit to the Centers for Medicare and Medicaid Services a request for
federal approval to implement the hospital assessment described in Minnesota Statutes,
section 256.9657, subdivision 2b, and the hospital directed payment program under
Minnesota Statutes, section 256B.1974. At least 60 days before submitting the request for
approval, the commissioner must make available to the public the draft assessment
requirements, draft directed payment details, and an estimate of each assessment amount
for each hospital without an exemption from the assessment pursuant to Minnesota Statutes,
section 256.9657, subdivision 2b, paragraph (k).
new text end

new text begin (c) During the design and prior to submission of the request for approval under paragraph
(b), the commissioner of human services must consult with the Minnesota Hospital
Association and any hospitals without an exemption from the assessment pursuant to
Minnesota Statutes, section 256.9657, subdivision 2b, paragraph (k), and that are not
members of the Minnesota Hospital Association.
new text end

new text begin (d) If federal approval is received for the request under paragraph (b), the commissioner
of human services must provide at least 30 days of public posting and review of the federally
approved terms and conditions for the assessment and the directed payment program prior
to any assessment under Minnesota Statutes, section 256.9657, subdivision 2b, becoming
due from a hospital.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end