3rd Engrossment - 81st Legislature (1999 - 2000) Posted on 12/15/2009 12:00am
1.1 A bill for an act 1.2 relating to human services; modifying provisions in 1.3 long-term care; amending Minnesota Statutes 1998, 1.4 sections 256B.411, subdivision 2; and 256B.431, 1.5 subdivisions 1, 3a, 10, 16, 18, 21, 22, and 25; 1.6 Minnesota Statutes 1999 Supplement, sections 1.7 256B.0913, subdivision 5; 256B.431, subdivisions 17 1.8 and 26; and 256B.434, subdivisions 3 and 4; repealing 1.9 Minnesota Statutes 1998, sections 256B.03, subdivision 1.10 2; 256B.431, subdivisions 2, 2a, 2f, 2h, 2m, 2p, 2q, 1.11 3, 3b, 3d, 3h, 3j, 4, 5, 7, 8, 9, 9a, 12, and 24; 1.12 256B.48, subdivision 9; 256B.50, subdivision 3; and 1.13 256B.74, subdivision 3. 1.14 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 1.15 Section 1. Minnesota Statutes 1999 Supplement, section 1.16 256B.0913, subdivision 5, is amended to read: 1.17 Subd. 5. [SERVICES COVERED UNDER ALTERNATIVE CARE.] (a) 1.18 Alternative care funding may be used for payment of costs of: 1.19 (1) adult foster care; 1.20 (2) adult day care; 1.21 (3) home health aide; 1.22 (4) homemaker services; 1.23 (5) personal care; 1.24 (6) case management; 1.25 (7) respite care; 1.26 (8) assisted living; 1.27 (9) residential care services; 1.28 (10) care-related supplies and equipment; 1.29 (11) meals delivered to the home; 2.1 (12) transportation; 2.2 (13) skilled nursing; 2.3 (14) chore services; 2.4 (15) companion services; 2.5 (16) nutrition services; 2.6 (17) training for direct informal caregivers; 2.7 (18) telemedicine devices to monitor recipients in their 2.8 own homes as an alternative to hospital care, nursing home care, 2.9 or home visits; and 2.10 (19) other services including direct cash payments to 2.11 clients, approved by the county agency, subject to the 2.12 provisions of paragraph (m). Total annual payments for other 2.13 services for all clients within a county may not exceed either 2.14 ten percent of that county's annual alternative care program 2.15 base allocation or $5,000, whichever is greater. In no case 2.16 shall this amount exceed the county's total annual alternative 2.17 care program base allocation. 2.18 (b) The county agency must ensure that the funds are used 2.19 only to supplement and not supplant services available through 2.20 other public assistance or services programs. 2.21 (c) Unless specified in statute, the service standards for 2.22 alternative care services shall be the same as the service 2.23 standards defined in the elderly waiver. Except for the county 2.24 agencies' approval of direct cash payments to clients, persons 2.25 or agencies must be employed by or under a contract with the 2.26 county agency or the public health nursing agency of the local 2.27 board of health in order to receive funding under the 2.28 alternative care program. 2.29 (d) The adult foster care rate shall be considered a 2.30 difficulty of care payment and shall not include room and 2.31 board. The adult foster care daily rate shall be negotiated 2.32 between the county agency and the foster care provider. The 2.33 rate established under this section shall not exceed 75 percent 2.34 of the state average monthly nursing home payment for the case 2.35 mix classification to which the individual receiving foster care 2.36 is assigned, and it must allow for other alternative care 3.1 services to be authorized by the case manager. 3.2 (e) Personal care services may be provided by a personal 3.3 care provider organization. A county agency may contract with a 3.4 relative of the client to provide personal care services, but 3.5 must ensure nursing supervision. Covered personal care services 3.6 defined in section 256B.0627, subdivision 4, must meet 3.7 applicable standards in Minnesota Rules, part 9505.0335. 3.8 (f) A county may use alternative care funds to purchase 3.9 medical supplies and equipment without prior approval from the 3.10 commissioner when: (1) there is no other funding source; (2) 3.11 the supplies and equipment are specified in the individual's 3.12 care plan as medically necessary to enable the individual to 3.13 remain in the community according to the criteria in Minnesota 3.14 Rules, part 9505.0210, item A; and (3) the supplies and 3.15 equipment represent an effective and appropriate use of 3.16 alternative care funds. A county may use alternative care funds 3.17 to purchase supplies and equipment from a non-Medicaid certified 3.18 vendor if the cost for the items is less than that of a Medicaid 3.19 vendor. A county is not required to contract with a provider of 3.20 supplies and equipment if the monthly cost of the supplies and 3.21 equipment is less than $250. 3.22 (g) For purposes of this section, residential care services 3.23 are services which are provided to individuals living in 3.24 residential care homes. Residential care homes are currently 3.25 licensed as board and lodging establishments and are registered 3.26 with the department of health as providing special services. 3.27 Residential care services are defined as "supportive services" 3.28 and "health-related services." "Supportive services" means the 3.29 provision of up to 24-hour supervision and oversight. 3.30 Supportive services includes: (1) transportation, when provided 3.31 by the residential care center only; (2) socialization, when 3.32 socialization is part of the plan of care, has specific goals 3.33 and outcomes established, and is not diversional or recreational 3.34 in nature; (3) assisting clients in setting up meetings and 3.35 appointments; (4) assisting clients in setting up medical and 3.36 social services; (5) providing assistance with personal laundry, 4.1 such as carrying the client's laundry to the laundry room. 4.2 Assistance with personal laundry does not include any laundry, 4.3 such as bed linen, that is included in the room and board rate. 4.4 Health-related services are limited to minimal assistance with 4.5 dressing, grooming, and bathing and providing reminders to 4.6 residents to take medications that are self-administered or 4.7 providing storage for medications, if requested. Individuals 4.8 receiving residential care services cannot receiveboth personal4.9care services and residential carehomemaking services. 4.10 (h) For the purposes of this section, "assisted living" 4.11 refers to supportive services provided by a single vendor to 4.12 clients who reside in the same apartment building of three or 4.13 more units which are not subject to registration under chapter 4.14 144D. Assisted living services are defined as up to 24-hour 4.15 supervision, and oversight, supportive services as defined in 4.16 clause (1), individualized home care aide tasks as defined in 4.17 clause (2), and individualized home management tasks as defined 4.18 in clause (3) provided to residents of a residential center 4.19 living in their units or apartments with a full kitchen and 4.20 bathroom. A full kitchen includes a stove, oven, refrigerator, 4.21 food preparation counter space, and a kitchen utensil storage 4.22 compartment. Assisted living services must be provided by the 4.23 management of the residential center or by providers under 4.24 contract with the management or with the county. 4.25 (1) Supportive services include: 4.26 (i) socialization, when socialization is part of the plan 4.27 of care, has specific goals and outcomes established, and is not 4.28 diversional or recreational in nature; 4.29 (ii) assisting clients in setting up meetings and 4.30 appointments; and 4.31 (iii) providing transportation, when provided by the 4.32 residential center only. 4.33 Individuals receiving assisted living services will not 4.34 receive both assisted living services and homemakingor personal4.35careservices. Individualized means services are chosen and 4.36 designed specifically for each resident's needs, rather than 5.1 provided or offered to all residents regardless of their 5.2 illnesses, disabilities, or physical conditions. 5.3 (2) Home care aide tasks means: 5.4 (i) preparing modified diets, such as diabetic or low 5.5 sodium diets; 5.6 (ii) reminding residents to take regularly scheduled 5.7 medications or to perform exercises; 5.8 (iii) household chores in the presence of technically 5.9 sophisticated medical equipment or episodes of acute illness or 5.10 infectious disease; 5.11 (iv) household chores when the resident's care requires the 5.12 prevention of exposure to infectious disease or containment of 5.13 infectious disease; and 5.14 (v) assisting with dressing, oral hygiene, hair care, 5.15 grooming, and bathing, if the resident is ambulatory, and if the 5.16 resident has no serious acute illness or infectious disease. 5.17 Oral hygiene means care of teeth, gums, and oral prosthetic 5.18 devices. 5.19 (3) Home management tasks means: 5.20 (i) housekeeping; 5.21 (ii) laundry; 5.22 (iii) preparation of regular snacks and meals; and 5.23 (iv) shopping. 5.24 Assisted living services as defined in this section shall 5.25 not be authorized in boarding and lodging establishments 5.26 licensed according to sections 157.011 and 157.15 to 157.22. 5.27 (i) For establishments registered under chapter 144D, 5.28 assisted living services under this section means the services 5.29 described and licensed under section 144A.4605. 5.30 (j) For the purposes of this section, reimbursement for 5.31 assisted living services and residential care services shall be 5.32 a monthly rate negotiated and authorized by the county agency 5.33 based on an individualized service plan for each resident. The 5.34 rate shall not exceed the nonfederal share of the greater of 5.35 either the statewide or any of the geographic groups' weighted 5.36 average monthly medical assistance nursing facility payment rate 6.1 of the case mix resident class to which the 180-day eligible 6.2 client would be assigned under Minnesota Rules, parts 9549.0050 6.3 to 9549.0059, unless the services are provided by a home care 6.4 provider licensed by the department of health and are provided 6.5 in a building that is registered as a housing with services 6.6 establishment under chapter 144D and that provides 24-hour 6.7 supervision. 6.8 (k) For purposes of this section, companion services are 6.9 defined as nonmedical care, supervision and oversight, provided 6.10 to a functionally impaired adult. Companions may assist the 6.11 individual with such tasks as meal preparation, laundry and 6.12 shopping, but do not perform these activities as discrete 6.13 services. The provision of companion services does not entail 6.14 hands-on medical care. Providers may also perform light 6.15 housekeeping tasks which are incidental to the care and 6.16 supervision of the recipient. This service must be approved by 6.17 the case manager as part of the care plan. Companion services 6.18 must be provided by individuals or organizations who are under 6.19 contract with the local agency to provide the service. Any 6.20 person related to the waiver recipient by blood, marriage or 6.21 adoption cannot be reimbursed under this service. Persons 6.22 providing companion services will be monitored by the case 6.23 manager. 6.24 (l) For purposes of this section, training for direct 6.25 informal caregivers is defined as a classroom or home course of 6.26 instruction which may include: transfer and lifting skills, 6.27 nutrition, personal and physical cares, home safety in a home 6.28 environment, stress reduction and management, behavioral 6.29 management, long-term care decision making, care coordination 6.30 and family dynamics. The training is provided to an informal 6.31 unpaid caregiver of a 180-day eligible client which enables the 6.32 caregiver to deliver care in a home setting with high levels of 6.33 quality. The training must be approved by the case manager as 6.34 part of the individual care plan. Individuals, agencies, and 6.35 educational facilities which provide caregiver training and 6.36 education will be monitored by the case manager. 7.1 (m) A county agency may make payment from their alternative 7.2 care program allocation for other services provided to an 7.3 alternative care program recipient if those services prevent, 7.4 shorten, or delay institutionalization. These services may 7.5 include direct cash payments to the recipient for the purpose of 7.6 purchasing the recipient's services. The following provisions 7.7 apply to payments under this paragraph: 7.8 (1) a cash payment to a client under this provision cannot 7.9 exceed 80 percent of the monthly payment limit for that client 7.10 as specified in subdivision 4, paragraph (a), clause (7); 7.11 (2) a county may not approve any cash payment for a client 7.12 who has been assessed as having a dependency in orientation, 7.13 unless the client has an authorized representative under section 7.14 256.476, subdivision 2, paragraph (g), or for a client who is 7.15 concurrently receiving adult foster care, residential care, or 7.16 assisted living services; 7.17 (3) any service approved under this section must be a 7.18 service which meets the purpose and goals of the program as 7.19 listed in subdivision 1; 7.20 (4) cash payments must also meet the criteria of and are 7.21 governed by the procedures and liability protection established 7.22 in section 256.476, subdivision 4,paragraph7.23 paragraphs (b) through (h), and recipients of cash grants must 7.24 meet the requirements in section 256.476, subdivision 10; and 7.25 (5) the county shall report client outcomes, services, and 7.26 costs under this paragraph in a manner prescribed by the 7.27 commissioner. 7.28 Upon implementation of direct cash payments to clients under 7.29 this section, any person determined eligible for the alternative 7.30 care program who chooses a cash payment approved by the county 7.31 agency shall receive the cash payment under this section and not 7.32 under section 256.476 unless the person was receiving a consumer 7.33 support grant under section 256.476 before implementation of 7.34 direct cash payments under this section. 7.35 Sec. 2. Minnesota Statutes 1998, section 256B.411, 7.36 subdivision 2, is amended to read: 8.1 Subd. 2. [REQUIREMENTS.] No medical assistance payments 8.2 shall be made to any nursing facility unless the nursing 8.3 facility is certified to participate in the medical assistance 8.4 program under title XIX of the federal Social Security Act and 8.5 has in effect a provider agreement with the commissioner meeting 8.6 the requirements of state and federal statutes and rules. No 8.7 medical assistance payments shall be made to any nursing 8.8 facility unless the nursing facility complies with all 8.9 requirements of Minnesota Statutes including, but not limited 8.10 to, this chapter and rules adopted under it that govern 8.11 participation in the program. This section applies whether the 8.12 nursing facility participates fully in the medical assistance 8.13 program or is withdrawing from the medical assistance program. 8.14 No future payments may be made to any nursing facility which has 8.15 withdrawn or is withdrawing from the medical assistance program 8.16 except as provided in section 256B.48, subdivision 1a; provided,8.17however, that, or federal law. Payments may also be made under 8.18 a court order entered on or before June 7, 1985, unless the 8.19 court order is reversed on appeal. 8.20 Sec. 3. Minnesota Statutes 1998, section 256B.431, 8.21 subdivision 1, is amended to read: 8.22 Subdivision 1. [IN GENERAL.] The commissioner shall 8.23 determine prospective payment rates for resident care costs.In8.24determining the rates, the commissioner shall group nursing8.25facilities according to different levels of care and geographic8.26location until July 1, 1985.For rates established on or after 8.27 July 1, 1985, the commissioner shall develop procedures for 8.28 determining operating cost payment rates that take into account 8.29 the mix of resident needs, geographic location, and other 8.30 factors as determined by the commissioner. The commissioner 8.31 shall consider whether the fact that a facility is attached to a 8.32 hospital or has an average length of stay of 180 days or less 8.33 should be taken into account in determining rates. The 8.34 commissioner shall consider the use of the standard metropolitan 8.35 statistical areas when developing groups by geographic 8.36 location.Until the commissioner establishes procedures for9.1determining operating cost payment rates, the commissioner shall9.2group all convalescent and nursing care units attached to9.3hospitals into one group for purposes of determining9.4reimbursement for operating costs. On or before June 15, 1983,9.5the commissioner shall mail notices to each nursing facility of9.6the rates to be effective from July 1 of that year to June 30 of9.7the following year. In subsequent years,The commissioner shall 9.8 provide notice to each nursing facility on or before May 1 of 9.9 the rates effective for the following rate year. If a statute9.10enacted after May 1 affects the rates, the commissioner shall9.11provide a revised notice to each nursing facility as soon as9.12possibleexcept that if legislation is pending on May 1 that may 9.13 affect rates for nursing facilities, the commissioner shall set 9.14 the rates after the legislation is enacted and provide notice to 9.15 each facility as soon as possible. 9.16The commissioner shall establish, by rule, limitations on9.17compensation recognized in the historical base for top9.18management personnel. For rate years beginning July 1, 1985,9.19the commissioner shall not provide, by rule, limitations on top9.20management personnel.Compensation for top management personnel 9.21 shall continue to be categorized as a general and administrative 9.22 cost and is subject to any limits imposed on that cost 9.23 category.The commissioner shall also establish, by rule,9.24limitations on allowable nursing hours for each level of care9.25for the rate years beginning July 1, 1983 and July 1, 1984. For9.26the rate year beginning July 1, 1984, nursing facilities in9.27which the nursing hours exceeded 2.9 hours per day for skilled9.28nursing care or 2.3 hours per day for intermediate care for the9.29reporting year ending on September 30, 1983, shall be limited to9.30a maximum of 3.2 hours per day for skilled nursing care and 2.69.31hours per day for intermediate care.9.32 Sec. 4. Minnesota Statutes 1998, section 256B.431, 9.33 subdivision 3a, is amended to read: 9.34 Subd. 3a. [PROPERTY-RELATED COSTS AFTER JULY 1, 1985.] (a) 9.35 For rate years beginning on or after July 1, 1985, the 9.36 commissioner, by permanent rule, shall reimburse nursing 10.1 facility providers that are vendors in the medical assistance 10.2 program for the rental use of real estate and depreciable 10.3 equipment. "Real estate" means land improvements, buildings, 10.4 and attached fixtures used directly for resident care. 10.5 "Depreciable equipment" means the standard movable resident care 10.6 equipment and support service equipment generally used in 10.7 long-term care facilities. 10.8 (b) In developing the method for determining payment rates 10.9 for the rental use of nursing facilities, the commissioner shall 10.10 consider factors designed to: 10.11 (1) simplify the administrative procedures for determining 10.12 payment rates for property-related costs; 10.13 (2) minimize discretionary or appealable decisions; 10.14 (3) eliminate any incentives to sell nursing facilities; 10.15 (4) recognize legitimate costs of preserving and replacing 10.16 property; 10.17 (5) recognize the existing costs of outstanding 10.18 indebtedness allowable under the statutes and rules in effect on 10.19 May 1, 1983; 10.20 (6) address the current value of, if used directly for 10.21 patient care, land improvements, buildings, attached fixtures, 10.22 and equipment; 10.23 (7) establish an investment per bed limitation; 10.24 (8) reward efficient management of capital assets; 10.25 (9) provide equitable treatment of facilities; 10.26 (10) consider a variable rate; and 10.27 (11) phase-in implementation of the rental reimbursement 10.28 method. 10.29(c) No later than January 1, 1984, the commissioner shall10.30report to the legislature on any further action necessary or10.31desirable in order to implement the purposes and provisions of10.32this subdivision.10.33(d)(c) For rate years beginning on or after July 1, 1987, 10.34 a nursing facility which has reduced licensed bed capacity after 10.35 January 1, 1986, shall be allowed to: 10.36 (1) aggregate the applicable investment per bed limits 11.1 based on the number of beds licensed prior to the reduction; and 11.2 (2) establish capacity days for each rate year following 11.3 the licensure reduction based on the number of beds licensed on 11.4 the previous April 1 if the commissioner is notified of the 11.5 change by April 4. The notification must include a copy of the 11.6 delicensure request that has been submitted to the commissioner 11.7 of health. 11.8(e) Until the rental reimbursement method is fully phased11.9in, a nursing facility whose final property-related payment rate11.10is the rental rate shall continue to have its property-related11.11payment rates established based on the rental reimbursement11.12method.11.13(f)(d) For rate years beginning on or after July 1, 1989, 11.14 the interest expense that results from a refinancing of a 11.15 nursing facility's demand call loan, when the loan that must be 11.16 refinanced was incurred before May 22, 1983, is an allowable 11.17 interest expense if: 11.18 (1) the demand call loan or any part of it was in the form 11.19 of a loan that was callable at the demand of the lender; 11.20 (2) the demand call loan or any part of it was called by 11.21 the lender through no fault of the nursing facility; 11.22 (3) the demand call loan or any part of it was made by a 11.23 government agency operating under a statutory or regulatory loan 11.24 program; 11.25 (4) the refinanced debt does not exceed the sum of the 11.26 allowable remaining balance of the demand call loan at the time 11.27 of payment on the demand call loan and refinancing costs; 11.28 (5) the term of the refinanced debt does not exceed the 11.29 remaining term of the demand call loan, had the debt not been 11.30 subject to an on-call payment demand; and 11.31 (6) the refinanced debt is not a debt between related 11.32 organizations as defined in Minnesota Rules, part 9549.0020, 11.33 subpart 38. 11.34 Sec. 5. Minnesota Statutes 1998, section 256B.431, 11.35 subdivision 10, is amended to read: 11.36 Subd. 10. [PROPERTY RATE ADJUSTMENTS AND CONSTRUCTION 12.1 PROJECTS.] A nursing facility's request for a property-related 12.2 payment rate adjustment and the related supporting documentation 12.3 of project construction cost information must be submitted to 12.4 the commissioner within 60 days after the construction project's 12.5 completion date to be considered eligible for a property-related 12.6 payment rate adjustment. Construction projects with completion 12.7 dates within one year of the completion date associated with the 12.8 property rate adjustment request and phased projects with 12.9 project completion dates within three years of the last phase of 12.10 the phased project must be aggregated for purposes of the 12.11 minimum thresholds in subdivisions 16 and 17, and the maximum 12.12 threshold in section 144A.071, subdivision 2. "Construction 12.13 project," and "project construction costs,"and "phased project"12.14 have the meanings given them in MinnesotaRules, part 4655.111012.15(Emergency)Statutes, section 144A.071, subdivision 1a. 12.16 Sec. 6. Minnesota Statutes 1998, section 256B.431, 12.17 subdivision 16, is amended to read: 12.18 Subd. 16. [MAJOR ADDITIONS AND REPLACEMENTS; EQUITY 12.19 INCENTIVE.] For rate years beginning after June 30, 1993, if a 12.20 nursing facility acquires capital assets in connection with a 12.21 project approved under the moratorium exception process in 12.22 section 144A.073 or in connection with an addition to or 12.23 replacement of buildings, attached fixtures, or land 12.24 improvements for which the total historical cost of those 12.25 capital asset additions exceeds the lesser of $150,000 or ten 12.26 percent of the most recent appraised value, the nursing facility 12.27 shall be eligible for an equity incentive payment rate as in 12.28 paragraphs (a) to (d). This computation is separate from the 12.29 determination of the nursing facility's rental rate. An equity 12.30 incentive payment rate as computed under this subdivision is 12.31 limited to one in a 12-month period. 12.32 (a) An eligible nursing facility shall receive an equity 12.33 incentive payment rate equal to the allowable historical cost of 12.34 the capital asset acquired, minus the allowable debt directly 12.35 identified to that capital asset, multiplied by the equity 12.36 incentive factor as described in paragraphs (b) and (c), and 13.1 divided by the nursing facility's occupancy factor under 13.2 subdivision 3f, paragraph (c). This amount shall be added to 13.3 the nursing facility's total payment rate and shall be effective 13.4 the same day as the incremental increase in paragraph (d) or 13.5 subdivision 17. The allowable historical cost of the capital 13.6 assets and the allowable debt shall be determined as provided in 13.7 Minnesota Rules, parts 9549.0010 to 9549.0080, and this section. 13.8 (b) The equity incentive factor shall be determined under 13.9 clauses (1) to (4): 13.10 (1) divide the initial allowable debt in paragraph (a) by 13.11 the initial historical cost of the capital asset additions 13.12 referred to in paragraph (a), then cube the quotient, 13.13 (2) subtract the amount calculated in clause (1) from the 13.14 number one, 13.15 (3) determine the difference between the rental factor and 13.16 the lesser of two percentage points above the posted yield for 13.17 standard conventional fixed rate mortgages of the Federal Home 13.18 Loan Mortgage Corporation as published in the Wall Street 13.19 Journal and in effect on the first day of the month the debt or 13.20 cost is incurred, or 16 percent, 13.21 (4) multiply the amount calculated in clause (2) by the 13.22 amount calculated in clause (3). 13.23 (c) The equity incentive payment rate shall be limited to 13.24 the term of the allowable debt in paragraph (a), not greater 13.25 than 20 years nor less than ten years. If no debt is incurred 13.26 in acquiring the capital asset, the equity incentive payment 13.27 rate shall be paid for ten years. The sale of a nursing 13.28 facility under subdivision 14 shall terminate application of the 13.29 equity incentive payment rate effective on the date provided in 13.30 subdivision414, paragraph (f), for the sale. 13.31 (d) A nursing facility with an addition to or a renovation 13.32 of its buildings, attached fixtures, or land improvements 13.33 meeting the criteria in this subdivision and not receiving the 13.34 property-related payment rate adjustment in subdivision 17, 13.35 shall receive the incremental increase in the nursing facility's 13.36 rental rate as determined under Minnesota Rules, parts 9549.0010 14.1 to 9549.0080, and this section. The incremental increase shall 14.2 be added to the nursing facility's property-related payment rate. 14.3 The effective date of this incremental increase shall be the 14.4 first day of the month following the month in which the addition 14.5 or replacement is completed. 14.6 Sec. 7. Minnesota Statutes 1999 Supplement, section 14.7 256B.431, subdivision 17, is amended to read: 14.8 Subd. 17. [SPECIAL PROVISIONS FOR MORATORIUM EXCEPTIONS.] 14.9 (a) Notwithstanding Minnesota Rules, part 9549.0060, subpart 3, 14.10 for rate periods beginning on October 1, 1992, and for rate 14.11 years beginning after June 30, 1993, a nursing facility that (1) 14.12 has completed a construction project approved under section 14.13 144A.071, subdivision 4a, clause (m); (2) has completed a 14.14 construction project approved under section 144A.071, 14.15 subdivision 4a, and effective after June 30, 1995; or (3) has 14.16 completed a renovation, replacement, or upgrading project 14.17 approved under the moratorium exception process in section 14.18 144A.073 shall be reimbursed for costs directly identified to 14.19 that project as provided in subdivision 16 and this subdivision. 14.20 (b) Notwithstanding Minnesota Rules, part 9549.0060, 14.21 subparts 5, item A, subitems (1) and (3), and 7, item D, 14.22 allowable interest expense on debt shall include: 14.23 (1) interest expense on debt related to the cost of 14.24 purchasing or replacing depreciable equipment, excluding 14.25 vehicles, not to exceed six percent of the total historical cost 14.26 of the project; and 14.27 (2) interest expense on debt related to financing or 14.28 refinancing costs, including costs related to points, loan 14.29 origination fees, financing charges, legal fees, and title 14.30 searches; and issuance costs including bond discounts, bond 14.31 counsel, underwriter's counsel, corporate counsel, printing, and 14.32 financial forecasts. Allowable debt related to items in this 14.33 clause shall not exceed seven percent of the total historical 14.34 cost of the project. To the extent these costs are financed, 14.35 the straight-line amortization of the costs in this clause is 14.36 not an allowable cost; and 15.1 (3) interest on debt incurred for the establishment of a 15.2 debt reserve fund, net of the interest earned on the debt 15.3 reserve fund. 15.4 (c) Debt incurred for costs under paragraph (b) is not 15.5 subject to Minnesota Rules, part 9549.0060, subpart 5, item A, 15.6 subitem (5) or (6). 15.7 (d) The incremental increase in a nursing facility's rental 15.8 rate, determined under Minnesota Rules, parts 9549.0010 to 15.9 9549.0080, and this section, resulting from the acquisition of 15.10 allowable capital assets, and allowable debt and interest 15.11 expense under this subdivision shall be added to its 15.12 property-related payment rate and shall be effective on the 15.13 first day of the month following the month in which the 15.14 moratorium project was completed. 15.15 (e) Notwithstanding subdivision 3f, paragraph (a), for rate 15.16 periods beginning on October 1, 1992, and for rate years 15.17 beginning after June 30, 1993, the replacement-costs-new per bed 15.18 limit to be used in Minnesota Rules, part 9549.0060, subpart 4, 15.19 item B, for a nursing facility that has completed a renovation, 15.20 replacement, or upgrading project that has been approved under 15.21 the moratorium exception process in section 144A.073, or that 15.22 has completed an addition to or replacement of buildings, 15.23 attached fixtures, or land improvements for which the total 15.24 historical cost exceeds the lesser of $150,000 or ten percent of 15.25 the most recent appraised value, must be $47,500 per licensed 15.26 bed in multiple-bed rooms and $71,250 per licensed bed in a 15.27 single-bed room. These amounts must be adjusted annually as 15.28 specified in subdivision 3f, paragraph (a), beginning January 1, 15.29 1993. 15.30(f) A nursing facility that completes a project identified15.31in this subdivision and, as of April 17, 1992, has not been15.32mailed a rate notice with a special appraisal for a completed15.33project, or completes a project after April 17, 1992, but before15.34September 1, 1992, may elect either to request a special15.35reappraisal with the corresponding adjustment to the15.36property-related payment rate under the laws in effect on June16.130, 1992, or to submit their capital asset and debt information16.2after that date and obtain the property-related payment rate16.3adjustment under this section, but not both.16.4(g)(f) For purposes of this paragraph, a total replacement 16.5 means the complete replacement of the nursing facility's 16.6 physical plant through the construction of a new physical plant 16.7 or the transfer of the nursing facility's license from one 16.8 physical plant location to another. For total replacement 16.9 projects completed on or after July 1, 1992, the commissioner 16.10 shall compute the incremental change in the nursing facility's 16.11 rental per diem, for rate years beginning on or after July 1, 16.12 1995, by replacing its appraised value, including the historical 16.13 capital asset costs, and the capital debt and interest costs 16.14 with the new nursing facility's allowable capital asset costs 16.15 and the related allowable capital debt and interest costs. If 16.16 the new nursing facility has decreased its licensed capacity, 16.17 the aggregate investment per bed limit in subdivision 3a, 16.18 paragraph(d)(c), shall apply. If the new nursing facility has 16.19 retained a portion of the original physical plant for nursing 16.20 facility usage, then a portion of the appraised value prior to 16.21 the replacement must be retained and included in the calculation 16.22 of the incremental change in the nursing facility's rental per 16.23 diem. For purposes of this part, the original nursing facility 16.24 means the nursing facility prior to the total replacement 16.25 project. The portion of the appraised value to be retained 16.26 shall be calculated according to clauses (1) to (3): 16.27 (1) The numerator of the allocation ratio shall be the 16.28 square footage of the area in the original physical plant which 16.29 is being retained for nursing facility usage. 16.30 (2) The denominator of the allocation ratio shall be the 16.31 total square footage of the original nursing facility physical 16.32 plant. 16.33 (3) Each component of the nursing facility's allowable 16.34 appraised value prior to the total replacement project shall be 16.35 multiplied by the allocation ratio developed by dividing clause 16.36 (1) by clause (2). 17.1 In the case of either type of total replacement as 17.2 authorized under section 144A.071 or 144A.073, the provisions of 17.3 this subdivision shall also apply. For purposes of the 17.4 moratorium exception authorized under section 144A.071, 17.5 subdivision 4a, paragraph (s), if the total replacement involves 17.6 the renovation and use of an existing health care facility 17.7 physical plant, the new allowable capital asset costs and 17.8 related debt and interest costs shall include first the 17.9 allowable capital asset costs and related debt and interest 17.10 costs of the renovation, to which shall be added the allowable 17.11 capital asset costs of the existing physical plant prior to the 17.12 renovation, and if reported by the facility, the related 17.13 allowable capital debt and interest costs. 17.14(h)(g) Notwithstanding Minnesota Rules, part 9549.0060, 17.15 subpart 11, item C, subitem (2), for a total replacement, as 17.16 defined in paragraph(g)(f), authorized under section 144A.071 17.17 or 144A.073 after July 1, 1999, the replacement-costs-new per 17.18 bed limit shall be $74,280 per licensed bed in multiple-bed 17.19 rooms, $92,850 per licensed bed in semiprivate rooms with a 17.20 fixed partition separating the resident beds, and $111,420 per 17.21 licensed bed in single rooms. Minnesota Rules, part 9549.0060, 17.22 subpart 11, item C, subitem (2), does not apply. These amounts 17.23 must be adjusted annually as specified in subdivision 3f, 17.24 paragraph (a), beginning January 1, 2000. 17.25(i)(h) For a total replacement, as defined in paragraph 17.26(g)(f), authorized under section 144A.073 for a 96-bed nursing 17.27 home in Carlton county, the replacement-costs-new per bed limit 17.28 shall be $74,280 per licensed bed in multiple-bed rooms, $92,850 17.29 per licensed bed in semiprivate rooms with a fixed partition 17.30 separating the resident's beds, and $111,420 per licensed bed in 17.31 a single room. Minnesota Rules, part 9549.0060, subpart 11, 17.32 item C, subitem (2), does not apply. The resulting maximum 17.33 allowable replacement-costs-new multiplied by 1.25 shall 17.34 constitute the project's dollar threshold for purposes of 17.35 application of the limit set forth in section 144A.071, 17.36 subdivision 2. The commissioner of health may waive the 18.1 requirements of section 144A.073, subdivision 3b, paragraph (b), 18.2 clause (2), on the condition that the other requirements of that 18.3 paragraph are met. 18.4 Sec. 8. Minnesota Statutes 1998, section 256B.431, 18.5 subdivision 18, is amended to read: 18.6 Subd. 18. [APPRAISALS;UPDATING APPRAISALS, ADDITIONS, AND 18.7 REPLACEMENTS.] (a) Notwithstanding Minnesota Rules, part 18.8 9549.0060, subparts 1 to 3, the appraised value, routine 18.9 updating of the appraised value, and special reappraisals are 18.10 subject to this subdivision. 18.11(1) For rate years beginning after June 30, 1993, the18.12commissioner shall permit a nursing facility to appeal its18.13appraisal. Any reappraisals conducted in connection with that18.14appeal must utilize the comparative-unit method as described in18.15the Marshall Valuation Service published by Marshall-Swift in18.16establishing the nursing facility's depreciated replacement cost.18.17Nursing facilities electing to appeal their appraised value18.18shall file written notice of appeal with the commissioner of18.19human services before December 30, 1992. The cost of the18.20reappraisal, if any, shall be considered an allowable cost under18.21Minnesota Rules, parts 9549.0040, subpart 9, and 9549.0061.18.22(2) The redetermination of a nursing facility's appraised18.23value under this paragraph shall have no impact on the rental18.24payment rate determined under subdivision 13 but shall only be18.25used for calculating the nursing facility's rental rate under18.26Minnesota Rules, parts 9549.0010 to 9549.0080, and this section18.27for rate years beginning after June 30, 1993.18.28(3)For all rate years after June 30, 1993, the 18.29 commissioner shall no longer conduct any appraisals under 18.30 Minnesota Rules, part 9549.0060, for the purpose of determining 18.31 property-related payment rates. 18.32 (b) Notwithstanding Minnesota Rules, part 9549.0060, 18.33 subpart 2, for rate years beginning after June 30, 1993, the 18.34 commissioner shall routinely update the appraised value of each 18.35 nursing facility by adding the cost of capital asset 18.36 acquisitions to its allowable appraised value. 19.1 The commissioner shall also annually index each nursing 19.2 facility's allowable appraised value by the inflation index 19.3 referenced in subdivision 3f, paragraph (a), for the purpose of 19.4 computing the nursing facility's annual rental rate. In 19.5 annually adjusting the nursing facility's appraised value, the 19.6 commissioner must not include the historical cost of capital 19.7 assets acquired during the reporting year in the nursing 19.8 facility's appraised value. 19.9 In addition, the nursing facility's appraised value must be 19.10 reduced by the historical cost of capital asset disposals or 19.11 applicable credits such as public grants and insurance 19.12 proceeds. Capital asset additions and disposals must be 19.13 reported on the nursing facility's annual cost report in the 19.14 reporting year of acquisition or disposal. The incremental 19.15 increase in the nursing facility's rental rate resulting from 19.16 this annual adjustment as determined under Minnesota Rules, 19.17 parts 9549.0010 to 9549.0080, and this section shall be added to 19.18 the nursing facility's property-related payment rate for the 19.19 rate year following the reporting year. 19.20 Sec. 9. Minnesota Statutes 1998, section 256B.431, 19.21 subdivision 21, is amended to read: 19.22 Subd. 21. [INDEXING THRESHOLDS.] Beginning January 1, 19.23 1993, and each January 1 thereafter, the commissioner shall 19.24 annually update the dollar thresholds in subdivisions 15, 19.25 paragraph(d)(e), 16, and 17, and in section 144A.071, 19.26 subdivisions 2 and 4a, clauses (b) and (e), by the inflation 19.27 index referenced in subdivision 3f, paragraph (a). 19.28 Sec. 10. Minnesota Statutes 1998, section 256B.431, 19.29 subdivision 22, is amended to read: 19.30 Subd. 22. [CHANGES TO NURSING FACILITY REIMBURSEMENT.] The 19.31 nursing facility reimbursement changes in paragraphs (a) 19.32 to(e)(d) apply to Minnesota Rules, parts 9549.0010 to 19.33 9549.0080, and this section, and are effective for rate years 19.34 beginning on or after July 1, 1993, unless otherwise indicated. 19.35 (a) In addition to the approved pension or profit sharing 19.36 plans allowed by the reimbursement rule, the commissioner shall 20.1 allow those plans specified in Internal Revenue Code, sections 20.2 403(b) and 408(k). 20.3 (b) The commissioner shall allow as workers' compensation 20.4 insurance costs under section 256B.421, subdivision 14, the 20.5 costs of workers' compensation coverage obtained under the 20.6 following conditions: 20.7 (1) a plan approved by the commissioner of commerce as a 20.8 Minnesota group or individual self-insurance plan as provided in 20.9 section 79A.03; 20.10 (2) a plan in which: 20.11 (i) the nursing facility, directly or indirectly, purchases 20.12 workers' compensation coverage in compliance with section 20.13 176.181, subdivision 2, from an authorized insurance carrier; 20.14 (ii) a related organization to the nursing facility 20.15 reinsures the workers' compensation coverage purchased, directly 20.16 or indirectly, by the nursing facility; and 20.17 (iii) all of the conditions in clause (4) are met; 20.18 (3) a plan in which: 20.19 (i) the nursing facility, directly or indirectly, purchases 20.20 workers' compensation coverage in compliance with section 20.21 176.181, subdivision 2, from an authorized insurance carrier; 20.22 (ii) the insurance premium is calculated retrospectively, 20.23 including a maximum premium limit, and paid using the paid loss 20.24 retro method; and 20.25 (iii) all of the conditions in clause (4) are met; 20.26 (4) additional conditions are: 20.27 (i) the costs of the plan are allowable under the federal 20.28 Medicare program; 20.29 (ii) the reserves for the plan are maintained in an account 20.30 controlled and administered by a person which is not a related 20.31 organization to the nursing facility; 20.32 (iii) the reserves for the plan cannot be used, directly or 20.33 indirectly, as collateral for debts incurred or other 20.34 obligations of the nursing facility or related organizations to 20.35 the nursing facility; 20.36 (iv) if the plan provides workers' compensation coverage 21.1 for non-Minnesota nursing facilities, the plan's cost 21.2 methodology must be consistent among all nursing facilities 21.3 covered by the plan, and if reasonable, is allowed 21.4 notwithstanding any reimbursement laws regarding cost allocation 21.5 to the contrary; 21.6 (v) central, affiliated, corporate, or nursing facility 21.7 costs related to their administration of the plan are costs 21.8 which must remain in the nursing facility's administrative cost 21.9 category and must not be allocated to other cost categories; 21.10 (vi) required security deposits, whether in the form of 21.11 cash, investments, securities, assets, letters of credit, or in 21.12 any other form are not allowable costs for purposes of 21.13 establishing the facilities payment rate; and 21.14 (vii) for the rate year beginning on July 1, 1998, a group 21.15 of nursing facilities related by common ownership that 21.16 self-insures workers' compensation may allocate its directly 21.17 identified costs of self-insuring its Minnesota nursing facility 21.18 workers among those nursing facilities in the group that are 21.19 reimbursed under this section or section 256B.434. The method 21.20 of cost allocation shall be based on the ratio of each nursing 21.21 facility's total allowable salaries and wages to that of the 21.22 nursing facility group's total allowable salaries and wages, 21.23 then similarly allocated within each nursing facility's 21.24 operating cost categories. The costs associated with the 21.25 administration of the group's self-insurance plan must remain 21.26 classified in the nursing facility's administrative cost 21.27 category. A written request of the nursing facility group's 21.28 election to use this alternate method of allocation of 21.29 self-insurance costs must be received by the commissioner no 21.30 later than May 1, 1998, to take effect July 1, 1998, or such 21.31 costs shall continue to be allocated under the existing cost 21.32 allocation methods. Once a nursing facility group elects this 21.33 method of cost allocation for its workers' compensation 21.34 self-insurance costs, it shall remain in effect until such time 21.35 as the group no longer self-insures these costs; 21.36 (5) any costs allowed pursuant to clauses (1) to (3) are 22.1 subject to the following requirements: 22.2 (i) if the nursing facility is sold or otherwise ceases 22.3 operations, the plan's reserves must be subject to an 22.4 actuarially based settle-up after 36 months from the date of 22.5 sale or the date on which operations ceased. The facility's 22.6 medical assistance portion of the total excess plan reserves 22.7 must be paid to the state within 30 days following the date on 22.8 which excess plan reserves are determined; 22.9 (ii) any distribution of excess plan reserves made to or 22.10 withdrawals made by the nursing facility or a related 22.11 organization are applicable credits and must be used to reduce 22.12 the nursing facility's workers' compensation insurance costs in 22.13 the reporting period in which a distribution or withdrawal is 22.14 received; 22.15 (iii) if reimbursement for the plan is sought under the 22.16 federal Medicare program, and is audited pursuant to the 22.17 Medicare program, the nursing facility must provide a copy of 22.18 Medicare's final audit report, including attachments and 22.19 exhibits, to the commissioner within 30 days of receipt by the 22.20 nursing facility or any related organization. The commissioner 22.21 shall implement the audit findings associated with the plan upon 22.22 receipt of Medicare's final audit report. The department's 22.23 authority to implement the audit findings is independent of its 22.24 authority to conduct a field audit. 22.25 (c) In the determination of incremental increases in the 22.26 nursing facility's rental rate as required in subdivisions 14 to 22.27 21, except for a refinancing permitted under subdivision 19, the 22.28 commissioner must adjust the nursing facility's property-related 22.29 payment rate for both incremental increases and decreases in 22.30 recomputations of its rental rate; 22.31 (d) A nursing facility's administrative cost limitation 22.32 must be modified as follows: 22.33 (1) if the nursing facility's licensed beds exceed 195 22.34 licensed beds, the general and administrative cost category 22.35 limitation shall be 13 percent; 22.36 (2) if the nursing facility's licensed beds are more than 23.1 150 licensed beds, but less than 196 licensed beds, the general 23.2 and administrative cost category limitation shall be 14 percent; 23.3 or 23.4 (3) if the nursing facility's licensed beds is less than 23.5 151 licensed beds, the general and administrative cost category 23.6 limitation shall remain at 15 percent. 23.7 (e)The care related operating rate shall be increased by23.8eight cents to reimburse facilities for unfunded federal23.9mandates, including costs related to hepatitis B vaccinations.23.10(f)For the rate year beginning on July 1, 1998, a group of 23.11 nursing facilities related by common ownership that self-insures 23.12 group health, dental, or life insurance may allocate its 23.13 directly identified costs of self-insuring its Minnesota nursing 23.14 facility workers among those nursing facilities in the group 23.15 that are reimbursed under this section or section 256B.434. The 23.16 method of cost allocation shall be based on the ratio of each 23.17 nursing facility's total allowable salaries and wages to that of 23.18 the nursing facility group's total allowable salaries and wages, 23.19 then similarly allocated within each nursing facility's 23.20 operating cost categories. The costs associated with the 23.21 administration of the group's self-insurance plan must remain 23.22 classified in the nursing facility's administrative cost 23.23 category. A written request of the nursing facility group's 23.24 election to use this alternate method of allocation of 23.25 self-insurance costs must be received by the commissioner no 23.26 later than May 1, 1998, to take effect July 1, 1998, or those 23.27 self-insurance costs shall continue to be allocated under the 23.28 existing cost allocation methods. Once a nursing facility group 23.29 elects this method of cost allocation for its group health, 23.30 dental, or life insurance self-insurance costs, it shall remain 23.31 in effect until such time as the group no longer self-insures 23.32 these costs. 23.33 Sec. 11. Minnesota Statutes 1998, section 256B.431, 23.34 subdivision 25, is amended to read: 23.35 Subd. 25. [CHANGES TO NURSING FACILITY REIMBURSEMENT 23.36 BEGINNING JULY 1, 1995.]The nursing facility reimbursement24.1changes in paragraphs (a) to (g) shall apply in the sequence24.2specified to Minnesota Rules, parts 9549.0010 to 9549.0080, and24.3this section, beginning July 1, 1995.24.4(a) The eight-cent adjustment to care-related rates in24.5subdivision 22, paragraph (e), shall no longer apply.24.6(b) For rate years beginning on or after July 1, 1995, the24.7commissioner shall limit a nursing facility's allowable24.8operating per diem for each case mix category for each rate year24.9as in clauses (1) to (3).24.10(1) For the rate year beginning July 1, 1995, the24.11commissioner shall group nursing facilities into two groups,24.12freestanding and nonfreestanding, within each geographic group,24.13using their operating cost per diem for the case mix A24.14classification. A nonfreestanding nursing facility is a nursing24.15facility whose other operating cost per diem is subject to the24.16hospital attached, short length of stay, or the rule 80 limits.24.17All other nursing facilities shall be considered freestanding24.18nursing facilities. The commissioner shall then array all24.19nursing facilities in each grouping by their allowable case mix24.20A operating cost per diem. In calculating a nursing facility's24.21operating cost per diem for this purpose, the commissioner shall24.22exclude the raw food cost per diem related to providing special24.23diets that are based on religious beliefs, as determined in24.24subdivision 2b, paragraph (h). For those nursing facilities in24.25each grouping whose case mix A operating cost per diem:24.26(i) is at or below the median minus 1.0 standard deviation24.27of the array, the commissioner shall limit the nursing24.28facility's allowable operating cost per diem for each case mix24.29category to the lesser of the prior reporting year's allowable24.30operating cost per diems plus the inflation factor as24.31established in paragraph (f), clause (2), increased by six24.32percentage points, or the current reporting year's corresponding24.33allowable operating cost per diem;24.34(ii) is between minus .5 standard deviation and minus 1.024.35standard deviation below the median of the array, the24.36commissioner shall limit the nursing facility's allowable25.1operating cost per diem for each case mix category to the lesser25.2of the prior reporting year's allowable operating cost per diems25.3plus the inflation factor as established in paragraph (f),25.4clause (2), increased by four percentage points, or the current25.5reporting year's corresponding allowable operating cost per25.6diem; or25.7(iii) is equal to or above minus .5 standard deviation25.8below the median of the array, the commissioner shall limit the25.9nursing facility's allowable operating cost per diem for each25.10case mix category to the lesser of the prior reporting year's25.11allowable operating cost per diems plus the inflation factor as25.12established in paragraph (f), clause (2), increased by three25.13percentage points, or the current reporting year's corresponding25.14allowable operating cost per diem.25.15(2) For the rate year beginning on July 1, 1996, the25.16commissioner shall limit the nursing facility's allowable25.17operating cost per diem for each case mix category to the lesser25.18of the prior reporting year's allowable operating cost per diems25.19plus the inflation factor as established in paragraph (f),25.20clause (2), increased by one percentage point or the current25.21reporting year's corresponding allowable operating cost per25.22diems; and25.23(3) For rate years beginning on or after July 1, 1997, the25.24commissioner shall limit the nursing facility's allowable25.25operating cost per diem for each case mix category to the lesser25.26of the reporting year prior to the current reporting year's25.27allowable operating cost per diems plus the inflation factor as25.28established in paragraph (f), clause (2), or the current25.29reporting year's corresponding allowable operating cost per25.30diems.25.31(c) For rate years beginning on July 1, 1995, the25.32commissioner shall limit the allowable operating cost per diems25.33for high cost nursing facilities. After application of the25.34limits in paragraph (b) to each nursing facility's operating25.35cost per diems, the commissioner shall group nursing facilities25.36into two groups, freestanding or nonfreestanding, within each26.1geographic group. A nonfreestanding nursing facility is a26.2nursing facility whose other operating cost per diems are26.3subject to hospital attached, short length of stay, or rule 8026.4limits. All other nursing facilities shall be considered26.5freestanding nursing facilities. The commissioner shall then26.6array all nursing facilities within each grouping by their26.7allowable case mix A operating cost per diems. In calculating a26.8nursing facility's operating cost per diem for this purpose, the26.9commissioner shall exclude the raw food cost per diem related to26.10providing special diets that are based on religious beliefs, as26.11determined in subdivision 2b, paragraph (h). For those nursing26.12facilities in each grouping whose case mix A operating cost per26.13diem exceeds 1.0 standard deviation above the median, the26.14commissioner shall reduce their allowable operating cost per26.15diems by two percent. For those nursing facilities in each26.16grouping whose case mix A operating cost per diem exceeds 0.526.17standard deviation above the median but is less than or equal to26.181.0 standard deviation above the median, the commissioner shall26.19reduce their allowable operating cost per diems by one percent.26.20(d) For rate years beginning on or after July 1, 1996, the26.21commissioner shall limit the allowable operating cost per diems26.22for high cost nursing facilities. After application of the26.23limits in paragraph (b) to each nursing facility's operating26.24cost per diems, the commissioner shall group nursing facilities26.25into two groups, freestanding or nonfreestanding, within each26.26geographic group. A nonfreestanding nursing facility is a26.27nursing facility whose other operating cost per diems are26.28subject to hospital attached, short length of stay, or rule 8026.29limits. All other nursing facilities shall be considered26.30freestanding nursing facilities. The commissioner shall then26.31array all nursing facilities within each grouping by their26.32allowable case mix A operating cost per diems. In calculating a26.33nursing facility's operating cost per diem for this purpose, the26.34commissioner shall exclude the raw food cost per diem related to26.35providing special diets that are based on religious beliefs, as26.36determined in subdivision 2b, paragraph (h). In those nursing27.1facilities in each grouping whose case mix A operating cost per27.2diem exceeds 1.0 standard deviation above the median, the27.3commissioner shall reduce their allowable operating cost per27.4diems by three percent. For those nursing facilities in each27.5grouping whose case mix A operating cost per diem exceeds 0.527.6standard deviation above the median but is less than or equal to27.71.0 standard deviation above the median, the commissioner shall27.8reduce their allowable operating cost per diems by two percent.27.9(e) For rate years beginning on or after July 1, 1995, the27.10commissioner shall determine a nursing facility's efficiency27.11incentive by first computing the allowable difference, which is27.12the lesser of $4.50 or the amount by which the facility's other27.13operating cost limit exceeds its nonadjusted other operating27.14cost per diem for that rate year. The commissioner shall27.15compute the efficiency incentive by:27.16(1) subtracting the allowable difference from $4.50 and27.17dividing the result by $4.50;27.18(2) multiplying 0.20 by the ratio resulting from clause27.19(1), and then;27.20(3) adding 0.50 to the result from clause (2); and27.21(4) multiplying the result from clause (3) times the27.22allowable difference.27.23The nursing facility's efficiency incentive payment shall27.24be the lesser of $2.25 or the product obtained in clause (4).27.25(f) For rate years beginning on or after July 1, 1995, the27.26forecasted price index for a nursing facility's allowable27.27operating cost per diems shall be determined under clauses (1)27.28to (3) using the change in the Consumer Price Index-All Items27.29(United States city average) (CPI-U) or the change in the27.30Nursing Home Market Basket, both as forecasted by Data Resources27.31Inc., whichever is applicable. The commissioner shall use the27.32indices as forecasted in the fourth quarter of the calendar year27.33preceding the rate year, subject to subdivision 2l, paragraph27.34(c). If, as a result of federal legislative or administrative27.35action, the methodology used to calculate the Consumer Price27.36Index-All Items (United States city average) (CPI-U) changes,28.1the commissioner shall develop a conversion factor or other28.2methodology to convert the CPI-U index factor that results from28.3the new methodology to an index factor that approximates, as28.4closely as possible, the index factor that would have resulted28.5from application of the original CPI-U methodology prior to any28.6changes in methodology. The commissioner shall use the28.7conversion factor or other methodology to calculate an adjusted28.8inflation index. The adjusted inflation index must be used to28.9calculate payment rates under this section instead of the CPI-U28.10index specified in paragraph (d). If the commissioner is28.11required to develop an adjusted inflation index, the28.12commissioner shall report to the legislature as part of the next28.13budget submission the fiscal impact of applying this index.28.14(1) The CPI-U forecasted index for allowable operating cost28.15per diems shall be based on the 21-month period from the28.16midpoint of the nursing facility's reporting year to the28.17midpoint of the rate year following the reporting year.28.18(2) The Nursing Home Market Basket forecasted index for28.19allowable operating costs and per diem limits shall be based on28.20the 12-month period between the midpoints of the two reporting28.21years preceding the rate year.28.22(3) For rate years beginning on or after July 1, 1996, the28.23forecasted index for operating cost limits referred to in28.24subdivision 21, paragraph (b), shall be based on the CPI-U for28.25the 12-month period between the midpoints of the two reporting28.26years preceding the rate year.28.27(g) After applying these provisions for the respective rate28.28years, the commissioner shall index these allowable operating28.29costs per diems by the inflation factor provided for in28.30paragraph (f), clause (1), and add the nursing facility's28.31efficiency incentive as computed in paragraph (e).28.32(h)(1)A nursing facility licensed for 302 beds on 28.33 September 30, 1993, that was approved under the moratorium 28.34 exception process in section 144A.073 for a partial replacement, 28.35 and completed the replacement project in December 1994, is 28.36 exempt from Minnesota Statutes 1998, section 256B.431, 29.1 subdivision 25, paragraphs (b) to (d) for rate years beginning 29.2 on or after July 1, 1995. 29.3(2)For the rate year beginning July 1, 1997, after 29.4 computing this nursing facility's payment rate according to 29.5 section 256B.434, the commissioner shall make a one-year rate 29.6 adjustment of $8.62 to the facility's contract payment rate for 29.7 the rate effect of operating cost changes associated with the 29.8 facility's 1994 downsizing project. 29.9(3)For rate years beginning on or after July 1, 1997, the 29.10 commissioner shall add 35 cents to the facility's base property 29.11 related payment rate for the rate effect of reducing its 29.12 licensed capacity to 290 beds from 302 beds and shall add 83 29.13 cents to the facility's real estate tax and special assessment 29.14 payment rate for payments in lieu of real estate taxes. The 29.15 adjustments in this clause shall remain in effect for the 29.16 duration of the facility's contract under section 256B.434. 29.17(i) Notwithstanding Laws 1996, chapter 451, article 3,29.18section 11, paragraph (h), for the rate years beginning on July29.191, 1996, July 1, 1997, and July 1, 1998, a nursing facility29.20licensed for 40 beds effective May 1, 1992, with a subsequent29.21increase of 20 Medicare/Medicaid certified beds, effective29.22January 26, 1993, in accordance with an increase in licensure is29.23exempt from paragraphs (b) to (d).29.24 Sec. 12. Minnesota Statutes 1999 Supplement, section 29.25 256B.431, subdivision 26, is amended to read: 29.26 Subd. 26. [CHANGES TO NURSING FACILITY REIMBURSEMENT 29.27 BEGINNING JULY 1, 1997.] The nursing facility reimbursement 29.28 changes in paragraphs (a) to(f)(e) shall apply in the sequence 29.29 specified in Minnesota Rules, parts 9549.0010 to 9549.0080, and 29.30 this section, beginning July 1, 1997. 29.31 (a) For rate years beginning on or after July 1, 1997, the 29.32 commissioner shall limit a nursing facility's allowable 29.33 operating per diem for each case mix category for each rate year. 29.34 The commissioner shall group nursing facilities into two groups, 29.35 freestanding and nonfreestanding, within each geographic group, 29.36 using their operating cost per diem for the case mix A 30.1 classification. A nonfreestanding nursing facility is a nursing 30.2 facility whose other operating cost per diem is subject to the 30.3 hospital attached, short length of stay, or the rule 80 limits. 30.4 All other nursing facilities shall be considered freestanding 30.5 nursing facilities. The commissioner shall then array all 30.6 nursing facilities in each grouping by their allowable case mix 30.7 A operating cost per diem. In calculating a nursing facility's 30.8 operating cost per diem for this purpose, the commissioner shall 30.9 exclude the raw food cost per diem related to providing special 30.10 diets that are based on religious beliefs, as determined in 30.11 subdivision 2b, paragraph (h). For those nursing facilities in 30.12 each grouping whose case mix A operating cost per diem: 30.13 (1) is at or below the median of the array, the 30.14 commissioner shall limit the nursing facility's allowable 30.15 operating cost per diem for each case mix category to the lesser 30.16 of the prior reporting year's allowable operating cost per diem 30.17 as specified in Laws 1996, chapter 451, article 3, section 11, 30.18 paragraph (h), plus the inflation factor as established in 30.19 paragraph (d), clause (2), increased by two percentage points, 30.20 or the current reporting year's corresponding allowable 30.21 operating cost per diem; or 30.22 (2) is above the median of the array, the commissioner 30.23 shall limit the nursing facility's allowable operating cost per 30.24 diem for each case mix category to the lesser of the prior 30.25 reporting year's allowable operating cost per diem as specified 30.26 in Laws 1996, chapter 451, article 3, section 11, paragraph (h), 30.27 plus the inflation factor as established in paragraph (d), 30.28 clause (2), increased by one percentage point, or the current 30.29 reporting year's corresponding allowable operating cost per diem. 30.30 For purposes of paragraph (a), if a nursing facility 30.31 reports on its cost report a reduction in cost due to a refund 30.32 or credit for a rate year beginning on or after July 1, 1998, 30.33 the commissioner shall increase that facility's spend-up limit 30.34 for the rate year following the current rate year by the amount 30.35 of the cost reduction divided by its resident days for the 30.36 reporting year preceding the rate year in which the adjustment 31.1 is to be made. 31.2 (b) For rate years beginning on or after July 1, 1997, the 31.3 commissioner shall limit the allowable operating cost per diem 31.4 for high cost nursing facilities. After application of the 31.5 limits in paragraph (a) to each nursing facility's operating 31.6 cost per diem, the commissioner shall group nursing facilities 31.7 into two groups, freestanding or nonfreestanding, within each 31.8 geographic group. A nonfreestanding nursing facility is a 31.9 nursing facility whose other operating cost per diem are subject 31.10 to hospital attached, short length of stay, or rule 80 limits. 31.11 All other nursing facilities shall be considered freestanding 31.12 nursing facilities. The commissioner shall then array all 31.13 nursing facilities within each grouping by their allowable case 31.14 mix A operating cost per diem. In calculating a nursing 31.15 facility's operating cost per diem for this purpose, the 31.16 commissioner shall exclude the raw food cost per diem related to 31.17 providing special diets that are based on religious beliefs, as 31.18 determined in subdivision 2b, paragraph (h). For those nursing 31.19 facilities in each grouping whose case mix A operating cost per 31.20 diem exceeds 1.0 standard deviation above the median, the 31.21 commissioner shall reduce their allowable operating cost per 31.22 diem by three percent. For those nursing facilities in each 31.23 grouping whose case mix A operating cost per diem exceeds 0.5 31.24 standard deviation above the median but is less than or equal to 31.25 1.0 standard deviation above the median, the commissioner shall 31.26 reduce their allowable operating cost per diem by two percent. 31.27 However, in no case shall a nursing facility's operating cost 31.28 per diem be reduced below its grouping's limit established at 31.29 0.5 standard deviations above the median. 31.30 (c) For rate years beginning on or after July 1, 1997, the 31.31 commissioner shall determine a nursing facility's efficiency 31.32 incentive by first computing the allowable difference, which is 31.33 the lesser of $4.50 or the amount by which the facility's other 31.34 operating cost limit exceeds its nonadjusted other operating 31.35 cost per diem for that rate year. The commissioner shall 31.36 compute the efficiency incentive by: 32.1 (1) subtracting the allowable difference from $4.50 and 32.2 dividing the result by $4.50; 32.3 (2) multiplying 0.20 by the ratio resulting from clause 32.4 (1), and then; 32.5 (3) adding 0.50 to the result from clause (2); and 32.6 (4) multiplying the result from clause (3) times the 32.7 allowable difference. 32.8 The nursing facility's efficiency incentive payment shall 32.9 be the lesser of $2.25 or the product obtained in clause (4). 32.10 (d) For rate years beginning on or after July 1, 1997, the 32.11 forecasted price index for a nursing facility's allowable 32.12 operating cost per diem shall be determined under clauses (1) 32.13 and (2) using the change in the Consumer Price Index-All Items 32.14 (United States city average) (CPI-U) as forecasted by Data 32.15 Resources, Inc. The commissioner shall use the indices as 32.16 forecasted in the fourth quarter of the calendar year preceding 32.17 the rate year, subject to subdivision 2l, paragraph (c). 32.18 (1) The CPI-U forecasted index for allowable operating cost 32.19 per diem shall be based on the 21-month period from the midpoint 32.20 of the nursing facility's reporting year to the midpoint of the 32.21 rate year following the reporting year. 32.22 (2) For rate years beginning on or after July 1, 1997, the 32.23 forecasted index for operating cost limits referred to in 32.24 subdivision 21, paragraph (b), shall be based on the CPI-U for 32.25 the 12-month period between the midpoints of the two reporting 32.26 years preceding the rate year. 32.27 (e) After applying these provisions for the respective rate 32.28 years, the commissioner shall index these allowable operating 32.29 cost per diem by the inflation factor provided for in paragraph 32.30 (d), clause (1), and add the nursing facility's efficiency 32.31 incentive as computed in paragraph (c). 32.32(f) For rate years beginning on or after July 1, 1997, the32.33total operating cost payment rates for a nursing facility shall32.34be the greater of the total operating cost payment rates32.35determined under this section or the total operating cost32.36payment rates in effect on June 30, 1997, subject to rate33.1adjustments due to field audit or rate appeal resolution. This33.2provision shall not apply to subsequent field audit adjustments33.3of the nursing facility's operating cost rates for rate years33.4beginning on or after July 1, 1997.33.5(g)(f) For the rate years beginning on July 1, 1997, July 33.6 1, 1998, and July 1, 1999, a nursing facility licensed for 40 33.7 beds effective May 1, 1992, with a subsequent increase of 20 33.8 Medicare/Medicaid certified beds, effective January 26, 1993, in 33.9 accordance with an increase in licensure is exempt from 33.10 paragraphs (a) and (b). 33.11(h)(g) For a nursing facility whose construction project 33.12 was authorized according to section 144A.073, subdivision 5, 33.13 paragraph (g), the operating cost payment rates for the new 33.14 location shall be determined based on Minnesota Rules, part 33.15 9549.0057. The relocation allowed under section 144A.073, 33.16 subdivision 5, paragraph (g), and the rate determination allowed 33.17 under this paragraph must meet the cost neutrality requirements 33.18 of section 144A.073, subdivision 3c. Paragraphs (a) and (b) 33.19 shall not apply until the second rate year after the settle-up 33.20 cost report is filed. Notwithstanding subdivision 2b, paragraph 33.21 (g), real estate taxes and special assessments payable by the 33.22 new location, a 501(c)(3) nonprofit corporation, shall be 33.23 included in the payment rates determined under this subdivision 33.24 for all subsequent rate years. 33.25(i)(h) For the rate year beginning July 1, 1997, the 33.26 commissioner shall compute the payment rate for a nursing 33.27 facility licensed for 94 beds on September 30, 1996, that 33.28 applied in October 1993 for approval of a total replacement 33.29 under the moratorium exception process in section 144A.073, and 33.30 completed the approved replacement in June 1995, with other 33.31 operating cost spend-up limit under paragraph (a), increased by 33.32 $3.98, and after computing the facility's payment rate according 33.33 to this section, the commissioner shall make a one-year positive 33.34 rate adjustment of $3.19 for operating costs related to the 33.35 newly constructed total replacement, without application of 33.36 paragraphs (a) and (b). The facility's per diem, before the 34.1 $3.19 adjustment, shall be used as the prior reporting year's 34.2 allowable operating cost per diem for payment rate calculation 34.3 for the rate year beginning July 1, 1998. A facility described 34.4 in this paragraph is exempt from paragraph (b) for the rate 34.5 years beginning July 1, 1997, and July 1, 1998. 34.6(j)(i) For the purpose of applying the limit stated in 34.7 paragraph (a), a nursing facility in Kandiyohi county licensed 34.8 for 86 beds that was granted hospital-attached status on 34.9 December 1, 1994, shall have the prior year's allowable 34.10 care-related per diem increased by $3.207 and the prior year's 34.11 other operating cost per diem increased by $4.777 before adding 34.12 the inflation in paragraph (d), clause (2), for the rate year 34.13 beginning on July 1, 1997. 34.14(k)(j) For the purpose of applying the limit stated in 34.15 paragraph (a), a 117 bed nursing facility located in Pine county 34.16 shall have the prior year's allowable other operating cost per 34.17 diem increased by $1.50 before adding the inflation in paragraph 34.18 (d), clause (2), for the rate year beginning on July 1, 1997. 34.19(l)(k) For the purpose of applying the limit under 34.20 paragraph (a), a nursing facility in Hibbing licensed for 192 34.21 beds shall have the prior year's allowable other operating cost 34.22 per diem increased by $2.67 before adding the inflation in 34.23 paragraph (d), clause (2), for the rate year beginning July 1, 34.24 1997. 34.25 Sec. 13. Minnesota Statutes 1999 Supplement, section 34.26 256B.434, subdivision 3, is amended to read: 34.27 Subd. 3. [DURATION AND TERMINATION OF CONTRACTS.] (a) 34.28 Subject to available resources, the commissioner may begin to 34.29 execute contracts with nursing facilities November 1, 1995. 34.30 (b) All contracts entered into under this section are for a 34.31 term of one year. Either party may terminate a contract at any 34.32 time without cause by providing 90 calendar days advance written 34.33 notice to the other party. The decision to terminate a contract 34.34 is not appealable. Notwithstanding section 16C.05, subdivision 34.35 2, paragraph (a), clause (5), the contract shall be renegotiated 34.36 for additional one-year terms, unless either party provides 35.1 written notice of termination. The provisions of the contract 35.2 shall be renegotiated annually by the parties prior to the 35.3 expiration date of the contract. The parties may voluntarily 35.4 renegotiate the terms of the contract at any time by mutual 35.5 agreement. 35.6 (c) If a nursing facility fails to comply with the terms of 35.7 a contract, the commissioner shall provide reasonable notice 35.8 regarding the breach of contract and a reasonable opportunity 35.9 for the facility to come into compliance. If the facility fails 35.10 to come into compliance or to remain in compliance, the 35.11 commissioner may terminate the contract. If a contract is 35.12 terminated, the contract payment remains in effect for the 35.13 remainder of the rate year in which the contract was terminated, 35.14 but in all other respects the provisions of this section do not 35.15 apply to that facility effective the date the contract is 35.16 terminated. The contract shall contain a provision governing 35.17 the transition back to the cost-based reimbursement system 35.18 established under section 256B.431, subdivision 25,and 35.19 Minnesota Rules, parts 9549.0010 to 9549.0080. A contract 35.20 entered into under this section may be amended by mutual 35.21 agreement of the parties. 35.22 Sec. 14. Minnesota Statutes 1999 Supplement, section 35.23 256B.434, subdivision 4, is amended to read: 35.24 Subd. 4. [ALTERNATE RATES FOR NURSING FACILITIES.] (a) For 35.25 nursing facilities which have their payment rates determined 35.26 under this section rather than section 256B.431,subdivision 25,35.27 the commissioner shall establish a rate under this subdivision. 35.28 The nursing facility must enter into a written contract with the 35.29 commissioner. 35.30 (b) A nursing facility's case mix payment rate for the 35.31 first rate year of a facility's contract under this section is 35.32 the payment rate the facility would have received under section 35.33 256B.431, subdivision 25. 35.34 (c) A nursing facility's case mix payment rates for the 35.35 second and subsequent years of a facility's contract under this 35.36 section are the previous rate year's contract payment rates plus 36.1 an inflation adjustment. The index for the inflation adjustment 36.2 must be based on the change in the Consumer Price Index-All 36.3 Items (United States City average) (CPI-U) forecasted by Data 36.4 Resources, Inc., as forecasted in the fourth quarter of the 36.5 calendar year preceding the rate year. The inflation adjustment 36.6 must be based on the 12-month period from the midpoint of the 36.7 previous rate year to the midpoint of the rate year for which 36.8 the rate is being determined. For the rate years beginning on 36.9 July 1, 1999, and July 1, 2000, this paragraph shall apply only 36.10 to the property-related payment rate. In determining the amount 36.11 of the property-related payment rate adjustment under this 36.12 paragraph, the commissioner shall determine the proportion of 36.13 the facility's rates that are property-related based on the 36.14 facility's most recent cost report. 36.15 (d) The commissioner shall develop additional 36.16 incentive-based payments of up to five percent above the 36.17 standard contract rate for achieving outcomes specified in each 36.18 contract. The specified facility-specific outcomes must be 36.19 measurable and approved by the commissioner. The commissioner 36.20 may establish, for each contract, various levels of achievement 36.21 within an outcome. After the outcomes have been specified the 36.22 commissioner shall assign various levels of payment associated 36.23 with achieving the outcome. Any incentive-based payment cancels 36.24 if there is a termination of the contract. In establishing the 36.25 specified outcomes and related criteria the commissioner shall 36.26 consider the following state policy objectives: 36.27 (1) improved cost effectiveness and quality of life as 36.28 measured by improved clinical outcomes; 36.29 (2) successful diversion or discharge to community 36.30 alternatives; 36.31 (3) decreased acute care costs; 36.32 (4) improved consumer satisfaction; 36.33 (5) the achievement of quality; or 36.34 (6) any additional outcomes proposed by a nursing facility 36.35 that the commissioner finds desirable. 36.36 Sec. 15. [REPEALER.] 37.1 Minnesota Statutes 1998, sections 256B.03, subdivision 2; 37.2 256B.431, subdivisions 2, 2a, 2f, 2h, 2m, 2p, 2q, 3, 3b, 3d, 3h, 37.3 3j, 4, 5, 7, 8, 9, 9a, 12, and 24; 256B.48, subdivision 9; 37.4 256B.50, subdivision 3; and 256B.74, subdivision 3, are repealed 37.5 effective July 1, 2000. 37.6 Sec. 16. [REVISOR INSTRUCTIONS.] 37.7 In the next and subsequent editions of Minnesota Statutes 37.8 and Minnesota Rules, the revisor of statutes shall make any 37.9 necessary statutory cross-reference changes required as a result 37.10 of the provisions in this bill. 37.11 Sec. 17. [EFFECTIVE DATE.] 37.12 The amendment in section 1 to Minnesota Statutes, section 37.13 256B.0913, subdivision 5, paragraph (g), is effective July 1, 37.14 2000, or upon federal approval of amendments to Minnesota's home 37.15 and community-based waiver for elderly persons at risk of 37.16 nursing home level of care, health care financing administration 37.17 control number 0025.91.R3, whichever occurs later. The 37.18 remainder of section 1, and sections 2 to 15 are effective July 37.19 1, 2000.