1.1                          A bill for an act 
  1.2             relating to human services; providing automatic annual 
  1.3             inflation adjustments for hospitals, nursing 
  1.4             facilities, ICF/MRs, and home and community-based 
  1.5             providers; providing an additional rate increase for 
  1.6             nursing facilities, ICF/MRs, and home and 
  1.7             community-based providers; amending Minnesota Statutes 
  1.8             2000, sections 256.969, subdivision 1; 256B.431, 
  1.9             subdivisions 21, 26, by adding a subdivision; 
  1.10            256B.434, subdivision 4; 256B.435, subdivisions 1, 3; 
  1.11            256B.5011, subdivision 1; 256B.5012, subdivisions 2, 
  1.12            3, by adding a subdivision; 256B.765. 
  1.13  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.14     Section 1.  Minnesota Statutes 2000, section 256.969, 
  1.15  subdivision 1, is amended to read: 
  1.16     Subdivision 1.  [HOSPITAL COST INDEX.] (a) The hospital 
  1.17  cost index shall be the change in the Consumer Price Index-All 
  1.18  Items (United States city average) (CPI-U) forecasted by Data 
  1.19  Resources, Inc. the commissioner of finance's national economic 
  1.20  consultant.  The commissioner shall use the indices as 
  1.21  forecasted in the third quarter of the calendar year prior to 
  1.22  the rate year.  The hospital cost index may be used to adjust 
  1.23  the base year operating payment rate through the rate year on an 
  1.24  annually compounded basis.  
  1.25     (b) For fiscal years beginning on or after July 1, 1993, 
  1.26  through June 30, 2001, the commissioner of human services shall 
  1.27  not provide automatic annual inflation adjustments for hospital 
  1.28  payment rates under medical assistance, nor under general 
  1.29  assistance medical care, except that the inflation adjustments 
  2.1   under paragraph (a) for medical assistance, excluding general 
  2.2   assistance medical care, shall apply through calendar year 
  2.3   2001.  The index for calendar year 2000 shall be reduced 2.5 
  2.4   percentage points to recover overprojections of the index from 
  2.5   1994 to 1996.  
  2.6      (c) For fiscal years beginning on or after July 1, 2001, 
  2.7   the commissioner of human services shall not provide automatic 
  2.8   annual inflation adjustments for hospital payment rates under 
  2.9   general assistance medical care.  The commissioner of finance 
  2.10  shall include as a budget change request in each biennial 
  2.11  detailed expenditure budget submitted to the legislature under 
  2.12  section 16A.11 annual adjustments in hospital payment rates 
  2.13  under medical assistance and general assistance medical care, 
  2.14  based upon the hospital cost index. 
  2.15     (d) For fiscal years beginning on or after July 1, 2001, 
  2.16  the commissioner of human services shall provide automatic 
  2.17  annual inflation adjustments for hospital payment rates under 
  2.18  medical assistance, using the hospital cost index established in 
  2.19  paragraph (a). 
  2.20     Sec. 2.  Minnesota Statutes 2000, section 256B.431, 
  2.21  subdivision 2l, is amended to read: 
  2.22     Subd. 2l.  [INFLATION ADJUSTMENTS AFTER JULY 1, 1990.] (a) 
  2.23  For rate years beginning on or after July 1, 1990, the 
  2.24  forecasted composite price index for a nursing facility's 
  2.25  allowable operating cost per diems shall be determined using 
  2.26  Data Resources, Inc., the commissioner of finance's national 
  2.27  economic consultant's forecast for change in the Nursing Home 
  2.28  Market Basket.  The commissioner of human services shall use the 
  2.29  indices as forecasted by Data Resources, Inc., the commissioner 
  2.30  of finance's national economic consultant in the fourth quarter 
  2.31  of the calendar year preceding the rate year. 
  2.32     (b) For rate years beginning on or after July 1, 1992, the 
  2.33  commissioner shall index the prior year's operating cost limits 
  2.34  by the percentage change in the Data Resources, Inc., 
  2.35  commissioner of finance's national economic consultant's Nursing 
  2.36  Home Market Basket between the midpoint of the current reporting 
  3.1   year and the midpoint of the previous reporting year.  The 
  3.2   commissioner shall use the indices as forecasted by Data 
  3.3   Resources, Inc., the commissioner of finance's national economic 
  3.4   consultant in the fourth quarter of the calendar year preceding 
  3.5   the rate year.  
  3.6      (c) For the rate years beginning on or after period July 1, 
  3.7   1993, through June 30, 2001, the commissioner shall not provide 
  3.8   automatic annual inflation adjustments for nursing facilities.  
  3.9   The commissioner of finance shall include annual adjustments in 
  3.10  operating costs for nursing facilities as a budget change 
  3.11  request in each biennial detailed expenditure budget submitted 
  3.12  to the legislature under section 16A.11.  
  3.13     (d) For rate years beginning on or after July 1, 2001, the 
  3.14  commissioner shall provide automatic annual inflation 
  3.15  adjustments for nursing facilities, using the methodology in 
  3.16  subdivision 26, paragraph (d). 
  3.17     Sec. 3.  Minnesota Statutes 2000, section 256B.431, 
  3.18  subdivision 26, is amended to read: 
  3.19     Subd. 26.  [CHANGES TO NURSING FACILITY REIMBURSEMENT 
  3.20  BEGINNING JULY 1, 1997.] The nursing facility reimbursement 
  3.21  changes in paragraphs (a) to (e) shall apply in the sequence 
  3.22  specified in Minnesota Rules, parts 9549.0010 to 9549.0080, and 
  3.23  this section, beginning July 1, 1997. 
  3.24     (a) For rate years beginning on or after July 1, 1997, the 
  3.25  commissioner shall limit a nursing facility's allowable 
  3.26  operating per diem for each case mix category for each rate year.
  3.27  The commissioner shall group nursing facilities into two groups, 
  3.28  freestanding and nonfreestanding, within each geographic group, 
  3.29  using their operating cost per diem for the case mix A 
  3.30  classification.  A nonfreestanding nursing facility is a nursing 
  3.31  facility whose other operating cost per diem is subject to the 
  3.32  hospital attached, short length of stay, or the rule 80 limits.  
  3.33  All other nursing facilities shall be considered freestanding 
  3.34  nursing facilities.  The commissioner shall then array all 
  3.35  nursing facilities in each grouping by their allowable case mix 
  3.36  A operating cost per diem.  In calculating a nursing facility's 
  4.1   operating cost per diem for this purpose, the commissioner shall 
  4.2   exclude the raw food cost per diem related to providing special 
  4.3   diets that are based on religious beliefs, as determined in 
  4.4   subdivision 2b, paragraph (h).  For those nursing facilities in 
  4.5   each grouping whose case mix A operating cost per diem: 
  4.6      (1) is at or below the median of the array, the 
  4.7   commissioner shall limit the nursing facility's allowable 
  4.8   operating cost per diem for each case mix category to the lesser 
  4.9   of the prior reporting year's allowable operating cost per diem 
  4.10  as specified in Laws 1996, chapter 451, article 3, section 11, 
  4.11  paragraph (h), plus the inflation factor as established in 
  4.12  paragraph (d), clause (2), increased by two percentage points, 
  4.13  or the current reporting year's corresponding allowable 
  4.14  operating cost per diem; or 
  4.15     (2) is above the median of the array, the commissioner 
  4.16  shall limit the nursing facility's allowable operating cost per 
  4.17  diem for each case mix category to the lesser of the prior 
  4.18  reporting year's allowable operating cost per diem as specified 
  4.19  in Laws 1996, chapter 451, article 3, section 11, paragraph (h), 
  4.20  plus the inflation factor as established in paragraph (d), 
  4.21  clause (2), increased by one percentage point, or the current 
  4.22  reporting year's corresponding allowable operating cost per diem.
  4.23     For purposes of paragraph (a), if a nursing facility 
  4.24  reports on its cost report a reduction in cost due to a refund 
  4.25  or credit for a rate year beginning on or after July 1, 1998, 
  4.26  the commissioner shall increase that facility's spend-up limit 
  4.27  for the rate year following the current rate year by the amount 
  4.28  of the cost reduction divided by its resident days for the 
  4.29  reporting year preceding the rate year in which the adjustment 
  4.30  is to be made. 
  4.31     (b) For rate years beginning on or after July 1, 1997, the 
  4.32  commissioner shall limit the allowable operating cost per diem 
  4.33  for high cost nursing facilities.  After application of the 
  4.34  limits in paragraph (a) to each nursing facility's operating 
  4.35  cost per diem, the commissioner shall group nursing facilities 
  4.36  into two groups, freestanding or nonfreestanding, within each 
  5.1   geographic group.  A nonfreestanding nursing facility is a 
  5.2   nursing facility whose other operating cost per diem are subject 
  5.3   to hospital attached, short length of stay, or rule 80 limits.  
  5.4   All other nursing facilities shall be considered freestanding 
  5.5   nursing facilities.  The commissioner shall then array all 
  5.6   nursing facilities within each grouping by their allowable case 
  5.7   mix A operating cost per diem.  In calculating a nursing 
  5.8   facility's operating cost per diem for this purpose, the 
  5.9   commissioner shall exclude the raw food cost per diem related to 
  5.10  providing special diets that are based on religious beliefs, as 
  5.11  determined in subdivision 2b, paragraph (h).  For those nursing 
  5.12  facilities in each grouping whose case mix A operating cost per 
  5.13  diem exceeds 1.0 standard deviation above the median, the 
  5.14  commissioner shall reduce their allowable operating cost per 
  5.15  diem by three percent.  For those nursing facilities in each 
  5.16  grouping whose case mix A operating cost per diem exceeds 0.5 
  5.17  standard deviation above the median but is less than or equal to 
  5.18  1.0 standard deviation above the median, the commissioner shall 
  5.19  reduce their allowable operating cost per diem by two percent.  
  5.20  However, in no case shall a nursing facility's operating cost 
  5.21  per diem be reduced below its grouping's limit established at 
  5.22  0.5 standard deviations above the median. 
  5.23     (c) For rate years beginning on or after July 1, 1997, the 
  5.24  commissioner shall determine a nursing facility's efficiency 
  5.25  incentive by first computing the allowable difference, which is 
  5.26  the lesser of $4.50 or the amount by which the facility's other 
  5.27  operating cost limit exceeds its nonadjusted other operating 
  5.28  cost per diem for that rate year.  The commissioner shall 
  5.29  compute the efficiency incentive by: 
  5.30     (1) subtracting the allowable difference from $4.50 and 
  5.31  dividing the result by $4.50; 
  5.32     (2) multiplying 0.20 by the ratio resulting from clause 
  5.33  (1), and then; 
  5.34     (3) adding 0.50 to the result from clause (2); and 
  5.35     (4) multiplying the result from clause (3) times the 
  5.36  allowable difference. 
  6.1      The nursing facility's efficiency incentive payment shall 
  6.2   be the lesser of $2.25 or the product obtained in clause (4). 
  6.3      (d) For rate years beginning on or after July 1, 1997, the 
  6.4   forecasted price index for a nursing facility's allowable 
  6.5   operating cost per diem shall be determined under clauses (1) 
  6.6   and (2) using the change in the Consumer Price Index-All Items 
  6.7   (United States city average) (CPI-U) as forecasted by Data 
  6.8   Resources, Inc. the commissioner of finance's national economic 
  6.9   consultant.  The commissioner shall use the indices as 
  6.10  forecasted in the fourth quarter of the calendar year preceding 
  6.11  the rate year, subject to subdivision 2l, paragraph 
  6.12  paragraphs (c) and (d).  
  6.13     (1) The CPI-U forecasted index for allowable operating cost 
  6.14  per diem shall be based on the 21-month period from the midpoint 
  6.15  of the nursing facility's reporting year to the midpoint of the 
  6.16  rate year following the reporting year. 
  6.17     (2) For rate years beginning on or after July 1, 1997, the 
  6.18  forecasted index for operating cost limits referred to in 
  6.19  subdivision 21, paragraph (b), shall be based on the CPI-U for 
  6.20  the 12-month period between the midpoints of the two reporting 
  6.21  years preceding the rate year. 
  6.22     (e) After applying these provisions for the respective rate 
  6.23  years, the commissioner shall index these allowable operating 
  6.24  cost per diem by the inflation factor provided for in paragraph 
  6.25  (d), clause (1), and add the nursing facility's efficiency 
  6.26  incentive as computed in paragraph (c). 
  6.27     (f) For the rate years beginning on July 1, 1997, July 1, 
  6.28  1998, and July 1, 1999, a nursing facility licensed for 40 beds 
  6.29  effective May 1, 1992, with a subsequent increase of 20 
  6.30  Medicare/Medicaid certified beds, effective January 26, 1993, in 
  6.31  accordance with an increase in licensure is exempt from 
  6.32  paragraphs (a) and (b). 
  6.33     (g) For a nursing facility whose construction project was 
  6.34  authorized according to section 144A.073, subdivision 5, 
  6.35  paragraph (g), the operating cost payment rates for the new 
  6.36  location shall be determined based on Minnesota Rules, part 
  7.1   9549.0057.  The relocation allowed under section 144A.073, 
  7.2   subdivision 5, paragraph (g), and the rate determination allowed 
  7.3   under this paragraph must meet the cost neutrality requirements 
  7.4   of section 144A.073, subdivision 3c.  Paragraphs (a) and (b) 
  7.5   shall not apply until the second rate year after the settle-up 
  7.6   cost report is filed.  Notwithstanding subdivision 2b, paragraph 
  7.7   (g), real estate taxes and special assessments payable by the 
  7.8   new location, a 501(c)(3) nonprofit corporation, shall be 
  7.9   included in the payment rates determined under this subdivision 
  7.10  for all subsequent rate years. 
  7.11     (h) For the rate year beginning July 1, 1997, the 
  7.12  commissioner shall compute the payment rate for a nursing 
  7.13  facility licensed for 94 beds on September 30, 1996, that 
  7.14  applied in October 1993 for approval of a total replacement 
  7.15  under the moratorium exception process in section 144A.073, and 
  7.16  completed the approved replacement in June 1995, with other 
  7.17  operating cost spend-up limit under paragraph (a), increased by 
  7.18  $3.98, and after computing the facility's payment rate according 
  7.19  to this section, the commissioner shall make a one-year positive 
  7.20  rate adjustment of $3.19 for operating costs related to the 
  7.21  newly constructed total replacement, without application of 
  7.22  paragraphs (a) and (b).  The facility's per diem, before the 
  7.23  $3.19 adjustment, shall be used as the prior reporting year's 
  7.24  allowable operating cost per diem for payment rate calculation 
  7.25  for the rate year beginning July 1, 1998.  A facility described 
  7.26  in this paragraph is exempt from paragraph (b) for the rate 
  7.27  years beginning July 1, 1997, and July 1, 1998. 
  7.28     (i) For the purpose of applying the limit stated in 
  7.29  paragraph (a), a nursing facility in Kandiyohi county licensed 
  7.30  for 86 beds that was granted hospital-attached status on 
  7.31  December 1, 1994, shall have the prior year's allowable 
  7.32  care-related per diem increased by $3.207 and the prior year's 
  7.33  other operating cost per diem increased by $4.777 before adding 
  7.34  the inflation in paragraph (d), clause (2), for the rate year 
  7.35  beginning on July 1, 1997. 
  7.36     (j) For the purpose of applying the limit stated in 
  8.1   paragraph (a), a 117 bed nursing facility located in Pine county 
  8.2   shall have the prior year's allowable other operating cost per 
  8.3   diem increased by $1.50 before adding the inflation in paragraph 
  8.4   (d), clause (2), for the rate year beginning on July 1, 1997. 
  8.5      (k) For the purpose of applying the limit under paragraph 
  8.6   (a), a nursing facility in Hibbing licensed for 192 beds shall 
  8.7   have the prior year's allowable other operating cost per diem 
  8.8   increased by $2.67 before adding the inflation in paragraph (d), 
  8.9   clause (2), for the rate year beginning July 1, 1997. 
  8.10     Sec. 4.  Minnesota Statutes 2000, section 256B.431, is 
  8.11  amended by adding a subdivision to read: 
  8.12     Subd. 31.  [NURSING FACILITY RATE INCREASES BEGINNING JULY 
  8.13  1, 2001, AND JULY 1, 2002.] (a) For the rate years beginning 
  8.14  July 1, 2001, and July 1, 2002, the commissioner shall make 
  8.15  available to each nursing facility reimbursed under this 
  8.16  section, section 256B.434, or 256B.435, an adjustment for 
  8.17  salary-related costs equal to five percent of the total 
  8.18  operating payment rate.  The operating payment rates in effect 
  8.19  on June 30, 2001, and June 30, 2002, respectively, shall include 
  8.20  the adjustment in subdivision 2l, paragraph (c).  The 
  8.21  salary-related adjustment is in addition to and shall be 
  8.22  calculated subsequent to the annual inflation adjustment 
  8.23  required under subdivision 2l and sections 256B.434 and 256B.435.
  8.24     (b) The adjustment must be used to increase the wages of 
  8.25  all employees except management, the administrator, and central 
  8.26  office staff and to pay associated costs for FICA, the Medicare 
  8.27  tax, workers' compensation premiums, and federal and state 
  8.28  unemployment insurance. 
  8.29     Money received by a facility as a result of the additional 
  8.30  rate increase provided under this paragraph shall be used only 
  8.31  for wage increases implemented on or after July 1, 2001, or July 
  8.32  1, 2002, respectively, and shall not be used for wage increases 
  8.33  implemented prior to those dates. 
  8.34     (c) A nursing facility may apply for the 
  8.35  compensation-related payment rate adjustment calculated under 
  8.36  paragraph (b).  The application must be made to the commissioner 
  9.1   and contain a plan by which the nursing facility will distribute 
  9.2   the payment rate adjustment to employees of the nursing 
  9.3   facility.  For nursing facilities in which the employees are 
  9.4   represented by an exclusive bargaining representative, an 
  9.5   agreement negotiated and agreed to by the employer and the 
  9.6   exclusive bargaining representative constitutes the plan.  A 
  9.7   negotiated agreement may constitute the plan only if the 
  9.8   agreement is finalized after the date of enactment of all 
  9.9   increases for the rate year.  The commissioner shall review the 
  9.10  plan to ensure that the payment rate adjustment per diem is used 
  9.11  as provided in paragraph (b).  To be eligible, a facility must 
  9.12  submit its plan for the compensation distribution by December 31 
  9.13  each year.  If a facility's plan for compensation distribution 
  9.14  is effective for its employees after July 1 of the year that the 
  9.15  funds are available, the payment rate adjustment per diem shall 
  9.16  be effective the same date as its plan. 
  9.17     (d) A copy of the approved distribution plan must be made 
  9.18  available to all employees.  This must be done by giving each 
  9.19  employee a copy or by posting it in an area of the nursing 
  9.20  facility to which all employees have access.  If an employee 
  9.21  does not receive the compensation adjustment described in their 
  9.22  facility's approved plan and is unable to resolve the problem 
  9.23  with the facility's management or through the employee's union 
  9.24  representative, the employee may contact the commissioner at an 
  9.25  address or telephone number provided by the commissioner and 
  9.26  included in the approved plan.  
  9.27     Sec. 5.  Minnesota Statutes 2000, section 256B.434, 
  9.28  subdivision 4, is amended to read: 
  9.29     Subd. 4.  [ALTERNATE RATES FOR NURSING FACILITIES.] (a) For 
  9.30  nursing facilities which have their payment rates determined 
  9.31  under this section rather than section 256B.431, the 
  9.32  commissioner shall establish a rate under this subdivision.  The 
  9.33  nursing facility must enter into a written contract with the 
  9.34  commissioner. 
  9.35     (b) A nursing facility's case mix payment rate for the 
  9.36  first rate year of a facility's contract under this section is 
 10.1   the payment rate the facility would have received under section 
 10.2   256B.431. 
 10.3      (c) A nursing facility's case mix payment rates for the 
 10.4   second and subsequent years of a facility's contract under this 
 10.5   section are the previous rate year's contract payment rates plus 
 10.6   an inflation adjustment.  The index for the inflation adjustment 
 10.7   must be based on the change in the Consumer Price Index-All 
 10.8   Items (United States City average) (CPI-U) forecasted by Data 
 10.9   Resources, Inc. the commissioner of finance's national economic 
 10.10  consultant, as forecasted in the fourth quarter of the calendar 
 10.11  year preceding the rate year.  The inflation adjustment must be 
 10.12  based on the 12-month period from the midpoint of the previous 
 10.13  rate year to the midpoint of the rate year for which the rate is 
 10.14  being determined.  For the rate years beginning on July 1, 1999, 
 10.15  and July 1, 2000, this paragraph shall apply only to the 
 10.16  property-related payment rate.  In determining the amount of the 
 10.17  property-related payment rate adjustment under this paragraph, 
 10.18  the commissioner shall determine the proportion of the 
 10.19  facility's rates that are property-related based on the 
 10.20  facility's most recent cost report. 
 10.21     (d) The commissioner shall develop additional 
 10.22  incentive-based payments of up to five percent above the 
 10.23  standard contract rate for achieving outcomes specified in each 
 10.24  contract.  The specified facility-specific outcomes must be 
 10.25  measurable and approved by the commissioner.  The commissioner 
 10.26  may establish, for each contract, various levels of achievement 
 10.27  within an outcome.  After the outcomes have been specified the 
 10.28  commissioner shall assign various levels of payment associated 
 10.29  with achieving the outcome.  Any incentive-based payment cancels 
 10.30  if there is a termination of the contract.  In establishing the 
 10.31  specified outcomes and related criteria the commissioner shall 
 10.32  consider the following state policy objectives: 
 10.33     (1) improved cost effectiveness and quality of life as 
 10.34  measured by improved clinical outcomes; 
 10.35     (2) successful diversion or discharge to community 
 10.36  alternatives; 
 11.1      (3) decreased acute care costs; 
 11.2      (4) improved consumer satisfaction; 
 11.3      (5) the achievement of quality; or 
 11.4      (6) any additional outcomes proposed by a nursing facility 
 11.5   that the commissioner finds desirable. 
 11.6      Sec. 6.  Minnesota Statutes 2000, section 256B.435, 
 11.7   subdivision 1, is amended to read: 
 11.8      Subdivision 1.  [IN GENERAL.] Effective July 1, 2001, the 
 11.9   commissioner shall implement a performance-based contracting 
 11.10  system to replace the current method of setting operating cost 
 11.11  payment rates under sections 256B.431 and 256B.434 and Minnesota 
 11.12  Rules, parts 9549.0010 to 9549.0080.  Operating cost payment 
 11.13  rates for newly established facilities under Minnesota Rules, 
 11.14  part 9549.0057, shall be established using section 256B.431 and 
 11.15  Minnesota Rules, parts 9549.0010 to 9549.0070.  A nursing 
 11.16  facility in operation on May 1, 1998, with payment rates not 
 11.17  established under section 256B.431 or 256B.434 on that date, is 
 11.18  ineligible for this performance-based contracting system.  In 
 11.19  determining prospective payment rates of nursing facility 
 11.20  services, the commissioner shall distinguish between operating 
 11.21  costs and property-related costs.  The commissioner of finance 
 11.22  shall include provide an annual inflationary adjustment in 
 11.23  operating costs for nursing facilities using the inflation 
 11.24  factor specified in subdivision 3 and.  The commissioner of 
 11.25  finance shall include funding for incentive-based payments as a 
 11.26  budget change request in each biennial detailed expenditure 
 11.27  budget submitted to the legislature under section 16A.11.  
 11.28  Property related payment rates, including real estate taxes and 
 11.29  special assessments, shall be determined under section 256B.431 
 11.30  or 256B.434 or under a new property-related reimbursement 
 11.31  system, if one is implemented by the commissioner under 
 11.32  subdivision 3.  The commissioner shall present additional 
 11.33  recommendations for performance-based contracting for nursing 
 11.34  facilities to the legislature by February 15, 2000, in the 
 11.35  following specific areas: 
 11.36     (1) development of an interim default payment mechanism for 
 12.1   nursing facilities that do not respond to the state's request 
 12.2   for proposal but wish to continue participation in the medical 
 12.3   assistance program, and nursing facilities the state does not 
 12.4   select in the request for proposal process, and nursing 
 12.5   facilities whose contract has been canceled; 
 12.6      (2) development of criteria for facilities to earn 
 12.7   performance-based incentive payments based on relevant outcomes 
 12.8   negotiated by nursing facilities and the commissioner and that 
 12.9   recognize both continuous quality efforts and quality 
 12.10  improvement; 
 12.11     (3) development of criteria and a process under which 
 12.12  nursing facilities can request rate adjustments for low base 
 12.13  rates, geographic disparities, or other reasons; 
 12.14     (4) development of a dispute resolution mechanism for 
 12.15  nursing facilities that are denied a contract, denied incentive 
 12.16  payments, or denied a rate adjustment; 
 12.17     (5) development of a property payment system to address the 
 12.18  capital needs of nursing facilities that will be funded with 
 12.19  additional appropriations; 
 12.20     (6) establishment of a transitional plan to move from dual 
 12.21  assessment instruments to the federally mandated resident 
 12.22  assessment system, whereby the financial impact for each 
 12.23  facility would be budget neutral; 
 12.24     (7) identification of net cost implications for facilities 
 12.25  and to the department of preparing for and implementing 
 12.26  performance-based contracting or any proposed alternative 
 12.27  system; 
 12.28     (8) identification of facility financial and statistical 
 12.29  reporting requirements; and 
 12.30     (9) identification of exemptions from current regulations 
 12.31  and statutes applicable under performance-based contracting.  
 12.32     Sec. 7.  Minnesota Statutes 2000, section 256B.435, 
 12.33  subdivision 3, is amended to read: 
 12.34     Subd. 3.  [PAYMENT RATE PROVISIONS.] (a) For rate years 
 12.35  beginning on or after July 1, 2001, within the limits of 
 12.36  appropriations specifically for this purpose, the commissioner 
 13.1   shall determine operating cost payment rates for each licensed 
 13.2   and certified nursing facility by indexing its operating cost 
 13.3   payment rates in effect on June 30, 2001, for inflation.  For 
 13.4   rate years beginning on or after July 1, 2001, the inflation 
 13.5   factor must be based on the change in the Employment Cost Index 
 13.6   for Private Industry Workers - Total Compensation as forecasted 
 13.7   by the commissioner of finance's national economic consultant, 
 13.8   in the fourth quarter preceding the rate year.  The forecasted 
 13.9   index for operating cost payment rates shall be based on the 
 13.10  12-month period from the midpoint of the nursing facility's 
 13.11  prior rate year to the midpoint of the rate year for which the 
 13.12  operating payment rate is being determined.  The operating cost 
 13.13  payment rate to be inflated shall be the total payment rate in 
 13.14  effect on June 30, 2001, minus the portion determined to be the 
 13.15  property-related payment rate, minus the per diem amount of the 
 13.16  preadmission screening cost included in the nursing facility's 
 13.17  last payment rate established under section 256B.431. 
 13.18     (b) A per diem amount for preadmission screening will be 
 13.19  added onto the contract payment rates according to the method of 
 13.20  distribution of county allocation described in section 
 13.21  256B.0911, subdivision 6, paragraph (a). 
 13.22     (c) For rate years beginning on or after July 1, 2001, the 
 13.23  commissioner may implement a new method of payment for 
 13.24  property-related costs that addresses the capital needs of 
 13.25  facilities.  The new property payment system or systems, if 
 13.26  implemented, shall replace the current methods of setting 
 13.27  property payment rates under sections 256B.431 and 256B.434. 
 13.28     Sec. 8.  Minnesota Statutes 2000, section 256B.5011, 
 13.29  subdivision 1, is amended to read: 
 13.30     Subdivision 1.  [IN GENERAL.] Effective October 1, 2000, 
 13.31  the commissioner shall implement a contracting system to replace 
 13.32  the current method of setting total cost payment rates under 
 13.33  section 256B.501 and Minnesota Rules, parts 9553.0010 to 
 13.34  9553.0080.  In determining prospective payment rates of 
 13.35  intermediate care facilities for persons with mental retardation 
 13.36  or related conditions, the commissioner shall index each 
 14.1   facility's operating payment rate by an inflation factor as 
 14.2   described in section 256B.5012.  The commissioner of finance 
 14.3   shall include annual inflation adjustments in operating costs 
 14.4   for intermediate care facilities for persons with mental 
 14.5   retardation and related conditions as a budget change request in 
 14.6   each biennial detailed expenditure budget submitted to the 
 14.7   legislature under section 16A.11. 
 14.8      Sec. 9.  Minnesota Statutes 2000, section 256B.5012, 
 14.9   subdivision 2, is amended to read: 
 14.10     Subd. 2.  [OPERATING PAYMENT RATE.] (a) The operating 
 14.11  payment rate equals the facility's total payment rate in effect 
 14.12  on September 30, 2000, minus the property rate.  The operating 
 14.13  payment rate includes the special operating rate and the 
 14.14  efficiency incentive in effect as of September 30, 2000.  Within 
 14.15  the limits of appropriations specifically for this purpose, The 
 14.16  operating payment shall be increased for each rate year by the 
 14.17  annual percentage change in the Employment Cost Index for 
 14.18  Private Industry Workers - Total Compensation, as forecasted by 
 14.19  the commissioner of finance's economic consultant, in the second 
 14.20  quarter of the calendar year preceding the start of each rate 
 14.21  year.  In the case of the initial rate year beginning October 1, 
 14.22  2000, and continuing through December 31, 2001, the percentage 
 14.23  change shall be based on the percentage change in the Employment 
 14.24  Cost Index for Private Industry Workers - Total Compensation for 
 14.25  the 15-month period beginning October 1, 2000, as forecast by 
 14.26  Data Resources, Inc., the commissioner of finance's economic 
 14.27  consultant in the first quarter of 2000. 
 14.28     (b) Effective October 1, 2000, the operating payment rate 
 14.29  shall be adjusted to reflect an occupancy rate equal to 100 
 14.30  percent of the facility's capacity days as of September 30, 2000.
 14.31     Sec. 10.  Minnesota Statutes 2000, section 256B.5012, 
 14.32  subdivision 3, is amended to read: 
 14.33     Subd. 3.  [PROPERTY PAYMENT RATE.] (a) The property payment 
 14.34  rate effective October 1, 2000, is based on the facility's 
 14.35  modified property payment rate in effect on September 30, 2000.  
 14.36  The modified property payment rate is the actual property 
 15.1   payment rate exclusive of the effect of gains or losses on 
 15.2   disposal of capital assets or adjustments for excess 
 15.3   depreciation claims.  Effective October 1, 2000, a facility 
 15.4   minimum property rate of $8.13 shall be applied to all existing 
 15.5   ICF/MR facilities.  Facilities with a modified property payment 
 15.6   rate effective September 30, 2000, which is below the minimum 
 15.7   property rate shall receive an increase effective October 1, 
 15.8   2000, equal to the difference between the minimum property 
 15.9   payment rate and the modified property payment rate in effect as 
 15.10  of September 30, 2000.  Facilities with a modified property 
 15.11  payment rate at or above the minimum property payment rate 
 15.12  effective September 30, 2000, shall receive the modified 
 15.13  property payment rate effective October 1, 2000. 
 15.14     (b) Within the limits of appropriations specifically for 
 15.15  this purpose, Facility property payment rates shall be increased 
 15.16  annually for inflation, effective January 1, 2002.  The increase 
 15.17  shall be based on each facility's property payment rate in 
 15.18  effect on September 30, 2000.  Modified property payment rates 
 15.19  effective September 30, 2000, shall be arrayed from highest to 
 15.20  lowest before applying the minimum property payment rate in 
 15.21  paragraph (a).  For modified property payment rates at the 90th 
 15.22  percentile or above, the annual inflation increase shall be 
 15.23  zero.  For modified property payment rates below the 90th 
 15.24  percentile but equal to or above the 75th percentile, the annual 
 15.25  inflation increase shall be one percent.  For modified property 
 15.26  payment rates below the 75th percentile, the annual inflation 
 15.27  increase shall be two percent.  
 15.28     Sec. 11.  Minnesota Statutes 2000, section 256B.5012, is 
 15.29  amended by adding a subdivision to read: 
 15.30     Subd. 4.  [ICF/MR RATE INCREASES BEGINNING JANUARY 1, 2002, 
 15.31  AND JANUARY 1, 2003.] (a) For the rate years beginning January 
 15.32  1, 2002, and January 1, 2003, the commissioner shall make 
 15.33  available to each facility reimbursed under this section an 
 15.34  adjustment to the total operating payment rate of five percent 
 15.35  for salary-related costs.  The salary-related adjustment is in 
 15.36  addition to and shall be calculated subsequent to the annual 
 16.1   inflation adjustments required under subdivision 2.  
 16.2      (b) The adjustment shall be used to increase the wages of 
 16.3   all employees except administrative and central office employees 
 16.4   and to pay associated costs for FICA, the Medicare tax, workers' 
 16.5   compensation premiums, and federal and state unemployment 
 16.6   insurance provided that this increase shall be used only for 
 16.7   wage increases implemented on or after the first day of the 
 16.8   fiscal year in which the increase is available, and shall not be 
 16.9   used for wage increases implemented prior to that date. 
 16.10     (c) For each facility, the commissioner shall determine the 
 16.11  payment rate adjustment using the percentage specified in 
 16.12  paragraph (a) multiplied by the total operating payment rate in 
 16.13  effect on the last day of the prior rate year, and dividing the 
 16.14  resulting amount by the facility's actual resident days.  The 
 16.15  total operating payment rate shall include the adjustment 
 16.16  provided in section 256B.501, subdivision 12. 
 16.17     (d) Any facility whose payment rates are governed by 
 16.18  closure agreements, receivership agreements, or Minnesota Rules, 
 16.19  part 9553.0075, is not eligible for an adjustment otherwise 
 16.20  granted under this subdivision.  
 16.21     (e) A facility may apply for the compensation-related 
 16.22  payment rate adjustment calculated under paragraph (b).  The 
 16.23  application must be made to the commissioner and contain a plan 
 16.24  by which the facility will distribute the payment rate 
 16.25  adjustment to employees of the facility.  For facilities in 
 16.26  which the employees are represented by an exclusive bargaining 
 16.27  representative, an agreement negotiated and agreed to by the 
 16.28  employer and the exclusive bargaining representative constitutes 
 16.29  the plan.  A negotiated agreement may constitute the plan only 
 16.30  if the agreement is finalized after the date of enactment of all 
 16.31  rate increases for the rate year.  The commissioner shall review 
 16.32  the plan to ensure that the payment rate adjustment per diem is 
 16.33  used as provided in this subdivision.  To be eligible, a 
 16.34  facility must submit its plan for the compensation distribution 
 16.35  by March 31, 2002, and March 31, 2003, respectively.  If a 
 16.36  facility's plan for compensation distribution is effective for 
 17.1   its employees after the first day of the applicable rate year 
 17.2   that the funds are available, the payment rate adjustment per 
 17.3   diem shall be effective the same date as its plan. 
 17.4      (f) A copy of the approved distribution plan must be made 
 17.5   available to all employees.  This must be done by giving each 
 17.6   employee a copy or by posting it in an area of the facility to 
 17.7   which all employees have access.  If an employee does not 
 17.8   receive the compensation adjustment described in their 
 17.9   facility's approved plan and is unable to resolve the problem 
 17.10  with the facility's management or through the employee's union 
 17.11  representative, the employee may contact the commissioner at an 
 17.12  address or telephone number provided by the commissioner and 
 17.13  included in the approved plan. 
 17.14     Sec. 12.  Minnesota Statutes 2000, section 256B.765, is 
 17.15  amended to read: 
 17.16     256B.765 [PROVIDER RATE INCREASES.] 
 17.17     (a) Subdivision 1.  [ANNUAL INFLATION ADJUSTMENTS.] 
 17.18  Effective July 1, 2001, within the limits of appropriations 
 17.19  specifically for this purpose, the commissioner shall provide an 
 17.20  annual inflation adjustment for the providers listed 
 17.21  in paragraph (c) subdivision 2.  The index for the inflation 
 17.22  adjustment must be based on the change in the Employment Cost 
 17.23  Index for Private Industry Workers - Total Compensation 
 17.24  forecasted by Data Resources, Inc., as forecasted in the fourth 
 17.25  quarter of the calendar year preceding the fiscal year.  The 
 17.26  commissioner shall increase reimbursement or allocation rates by 
 17.27  the percentage of this adjustment, and county boards shall 
 17.28  adjust provider contracts as needed. 
 17.29     (b) The commissioner of finance shall include an annual 
 17.30  inflationary adjustment in reimbursement rates for the providers 
 17.31  listed in paragraph (c) using the inflation factor specified in 
 17.32  paragraph (a) as a budget change request in each biennial 
 17.33  detailed expenditure budget submitted to the legislature under 
 17.34  section 16A.11. 
 17.35     (c) Subd. 2.  [ELIGIBLE PROVIDERS.] The annual adjustment 
 17.36  under paragraph (a) shall be provided for home and 
 18.1   community-based waiver services for persons with mental 
 18.2   retardation or related conditions under section 256B.501; home 
 18.3   and community-based waiver services for the elderly under 
 18.4   section 256B.0915; waivered services under community 
 18.5   alternatives for disabled individuals under section 256B.49; 
 18.6   community alternative care waivered services under section 
 18.7   256B.49; traumatic brain injury waivered services under section 
 18.8   256B.49; nursing services and home health services under section 
 18.9   256B.0625, subdivision 6a; personal care services and nursing 
 18.10  supervision of personal care services under section 256B.0625, 
 18.11  subdivision 19a; private duty nursing services under section 
 18.12  256B.0625, subdivision 7; day training and habilitation services 
 18.13  for adults with mental retardation or related conditions under 
 18.14  sections 252.40 to 252.46; physical therapy services under 
 18.15  sections 256B.0625, subdivision 8, and 256D.03, subdivision 4; 
 18.16  occupational therapy services under sections 256B.0625, 
 18.17  subdivision 8a, and 256D.03, subdivision 4; speech-language 
 18.18  therapy services under section 256D.03, subdivision 4, and 
 18.19  Minnesota Rules, part 9505.0390; respiratory therapy services 
 18.20  under section 256D.03, subdivision 4, and Minnesota Rules, part 
 18.21  9505.0295; alternative care services under section 256B.0913; 
 18.22  adult residential program grants under Minnesota Rules, parts 
 18.23  9535.2000 to 9535.3000; adult and family community support 
 18.24  grants under Minnesota Rules, parts 9535.1700 to 9535.1760; 
 18.25  semi-independent living services under section 252.275 including 
 18.26  SILS funding under county social services grants formerly funded 
 18.27  under chapter 256I; and community support services for deaf and 
 18.28  hard-of-hearing adults with mental illness who use or wish to 
 18.29  use sign language as their primary means of communication. 
 18.30     Subd. 3.  [ADDITIONAL RATE INCREASE FOR THE BIENNIUM 
 18.31  BEGINNING JULY 1, 2001.] (a) For the fiscal years beginning July 
 18.32  1, 2001, and July 1, 2002, the commissioner shall increase 
 18.33  reimbursement rates by an additional five percent for the 
 18.34  providers listed in subdivision 2.  This increase is in addition 
 18.35  to and shall be calculated subsequent to the annual inflation 
 18.36  adjustments required under subdivision 1.  Providers that 
 19.1   receive a rate increase under this subdivision shall use all of 
 19.2   the additional revenue to increase the wages paid to employees 
 19.3   other than the administrator and central office staff, and to 
 19.4   pay for related payroll taxes. 
 19.5      (b) A copy of the provider's plan for complying with 
 19.6   paragraph (a) must be made available to all employees.  This 
 19.7   must be done by giving each employee a copy or by posting it in 
 19.8   an area of the provider's operation to which all employees have 
 19.9   access.  If an employee does not receive the salary adjustment 
 19.10  described in the plan and is unable to resolve the problem with 
 19.11  the provider, the employee may contact the employee's union 
 19.12  representative.  If the employee is not covered by a collective 
 19.13  bargaining agreement, the employee may contact the commissioner 
 19.14  at a telephone number provided by the commissioner and included 
 19.15  in the provider's plan.