as introduced - 81st Legislature (1999 - 2000) Posted on 12/15/2009 12:00am
1.1 A bill for an act 1.2 relating to human services; making changes to 1.3 long-term care provisions; changing provisions for 1.4 nursing facilities payment rates; amending Minnesota 1.5 Statutes 1998, sections 144D.01, subdivision 4; 1.6 256B.0911, subdivision 6; 256B.0913, subdivisions 5, 1.7 10, 12, and 16; 256B.421, subdivisions 9 and 11; 1.8 256B.431, subdivisions 1, 2b, 2d, 2i, 2r, 3a, 3f, 10, 1.9 11, 12, 13, 15, 16, 17, 18, 22, 26, and 27; 256B.434, 1.10 subdivisions 3 and 13; 256B.435; 256B.48, subdivisions 1.11 1, 1a, 1b, and 6; 256B.50, subdivisions 1 and 1e; 1.12 256I.04, subdivision 3; and 256I.05, subdivisions 1 1.13 and 1a; repealing Minnesota Statutes 1998, sections 1.14 256B.03, subdivision 2; 256B.431, subdivisions 2, 2a, 1.15 2c, 2f, 2h, 2j, 2k, 2l, 2m, 2n, 2o, 2p, 2q, 3, 3b, 3d, 1.16 3e, 3h, 3j, 4, 5, 7, 8, 9, 9a, 23, 24, and 25; 1.17 256B.433; 256B.434; 256B.47, subdivisions 3 and 4; 1.18 256B.48, subdivision 9; and 256B.50, subdivisions 1f 1.19 and 3. 1.20 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 1.21 ARTICLE 1 1.22 LONG-TERM CARE 1.23 Section 1. Minnesota Statutes 1998, section 144D.01, 1.24 subdivision 4, is amended to read: 1.25 Subd. 4. [HOUSING WITH SERVICES ESTABLISHMENT OR 1.26 ESTABLISHMENT.] "Housing with services establishment" or 1.27 "establishment" means an establishment providing sleeping 1.28 accommodations to one or more adult residents, at least 80 1.29 percent of which are 55 years of age or older, and offering or 1.30 providing, for a fee, one or more regularly scheduled 1.31 health-related services or two or more regularly scheduled 1.32 supportive services, whether offered or provided directly by the 2.1 establishment or by another entity arranged for by the 2.2 establishment. 2.3 Housing with services establishment does not include: 2.4 (1) a nursing home licensed under chapter 144A; 2.5 (2) a hospital, certified boarding care home, or supervised 2.6 living facility licensed under sections 144.50 to 144.56; 2.7 (3) a board and lodging establishment licensed under 2.8 chapter 157 and Minnesota Rules, parts 9520.0500 to 9520.0670, 2.9 9525.0215 to 9525.0355, 9525.0500 to 9525.0660, or 9530.4100 to 2.10 9530.4450, or under chapter 245B; 2.11 (4) a board and lodging establishment which serves as a 2.12 shelter for battered women or other similar purpose; 2.13 (5) a family adult foster care home licensed by the 2.14 department of human services; 2.15 (6) private homes in which the residents are related by 2.16 kinship, law, or affinity with the providers of services; 2.17 (7) residential settings for persons with mental 2.18 retardation or related conditions in which the services are 2.19 licensed under Minnesota Rules, parts 9525.2100 to 9525.2140, or 2.20 applicable successor rules or laws; 2.21 (8) a home-sharing arrangement such as when an elderly or 2.22 disabled person or single-parent family makes lodging in a 2.23 private residence available to another person in exchange for 2.24 services or rent, or both; 2.25 (9) a duly organized condominium, cooperative, common 2.26 interest community, or owners' association of the foregoing 2.27 where at least 80 percent of the units that comprise the 2.28 condominium, cooperative, or common interest community are 2.29 occupied by individuals who are the owners, members, or 2.30 shareholders of the units; or 2.31 (10) services for persons with developmental disabilities 2.32 that are provided under a license according to Minnesota Rules, 2.33 parts 9525.2000 to 9525.2140 in effect until January 1, 1998, or 2.34 under chapter 245B. 2.35 Sec. 2. Minnesota Statutes 1998, section 256B.0911, 2.36 subdivision 6, is amended to read: 3.1 Subd. 6. [PAYMENT FOR PREADMISSION SCREENING.] (a) The 3.2 total screening payment for each county must be paid monthly by 3.3 certified nursing facilities in the county. The monthly amount 3.4 to be paid by each nursing facility for each fiscal year must be 3.5 determined by dividing the county's annual allocation for 3.6 screenings by 12 to determine the monthly payment and allocating 3.7 the monthly payment to each nursing facility based on the number 3.8 of licensed beds in the nursing facility. 3.9 (b) The commissioner shall include the total annual payment 3.10 for screening for each nursing facility according to section 3.11 256B.431, subdivision 2b, paragraph (g), or 256B.435. 3.12 (c) Payments for screening activities are available to the 3.13 county or counties to cover staff salaries and expenses to 3.14 provide the screening function. The lead agency shall employ, 3.15 or contract with other agencies to employ, within the limits of 3.16 available funding, sufficient personnel to conduct the 3.17 preadmission screening activity while meeting the state's 3.18 long-term care outcomes and objectives as defined in section 3.19 256B.0917, subdivision 1. The local agency shall be accountable 3.20 for meeting local objectives as approved by the commissioner in 3.21 the CSSA biennial plan. 3.22(c)(d) Notwithstanding section 256B.0641, overpayments 3.23 attributable to payment of the screening costs under the medical 3.24 assistance program may not be recovered from a facility. 3.25(d)(e) The commissioner of human services shall amend the 3.26 Minnesota medical assistance plan to include reimbursement for 3.27 the local screening teams. 3.28 Sec. 3. Minnesota Statutes 1998, section 256B.0913, 3.29 subdivision 5, is amended to read: 3.30 Subd. 5. [SERVICES COVERED UNDER ALTERNATIVE CARE.] (a) 3.31 Alternative care funding may be used for payment of costs of: 3.32 (1) adult foster care; 3.33 (2) adult day care; 3.34 (3) home health aide; 3.35 (4) homemaker services; 3.36 (5) personal care; 4.1 (6) case management; 4.2 (7) respite care; 4.3 (8) assisted living; 4.4 (9) residential care services; 4.5 (10) care-related supplies and equipment; 4.6 (11) meals delivered to the home; 4.7 (12) transportation; 4.8 (13) skilled nursing; 4.9 (14) chore services; 4.10 (15) companion services; 4.11 (16) nutrition services; 4.12 (17) training for direct informal caregivers;and4.13 (18) telemedicine devices to monitor recipients in their 4.14 own homes as an alternative to hospital care, nursing home care, 4.15 or home visits.; and 4.16 (19) other services including direct cash payments to 4.17 clients, approved by the county agency, subject to the 4.18 provisions of paragraph (m). Total annual payments for other 4.19 services for all clients within a county may not exceed either 4.20 ten percent of that county's annual alternative care program 4.21 base allocation or $5,000, whichever is greater. In no case 4.22 shall this amount exceed the county's total annual alternative 4.23 care program base allocation. 4.24 (b) The county agency must ensure that the funds are used 4.25 only to supplement and not supplant services available through 4.26 other public assistance or services programs. 4.27 (c) Unless specified in statute, the service standards for 4.28 alternative care services shall be the same as the service 4.29 standards defined in the elderly waiver. Except for the county 4.30 agencies' approval of direct cash payments to clients, persons 4.31 or agencies must be employed by or under a contract with the 4.32 county agency or the public health nursing agency of the local 4.33 board of health in order to receive funding under the 4.34 alternative care program. 4.35 (d) The adult foster care rate shall be considered a 4.36 difficulty of care payment and shall not include room and 5.1 board. The adult foster care daily rate shall be negotiated 5.2 between the county agency and the foster care provider. The 5.3 rate established under this section shall not exceed 75 percent 5.4 of the state average monthly nursing home payment for the case 5.5 mix classification to which the individual receiving foster care 5.6 is assigned, and it must allow for other alternative care 5.7 services to be authorized by the case manager. 5.8 (e) Personal care services may be provided by a personal 5.9 care provider organization. A county agency may contract with a 5.10 relative of the client to provide personal care services, but 5.11 must ensure nursing supervision. Covered personal care services 5.12 defined in section 256B.0627, subdivision 4, must meet 5.13 applicable standards in Minnesota Rules, part 9505.0335. 5.14 (f) A county may use alternative care funds to purchase 5.15 medical supplies and equipment without prior approval from the 5.16 commissioner when: (1) there is no other funding source; (2) 5.17 the supplies and equipment are specified in the individual's 5.18 care plan as medically necessary to enable the individual to 5.19 remain in the community according to the criteria in Minnesota 5.20 Rules, part 9505.0210, item A; and (3) the supplies and 5.21 equipment represent an effective and appropriate use of 5.22 alternative care funds. A county may use alternative care funds 5.23 to purchase supplies and equipment from a non-Medicaid certified 5.24 vendor if the cost for the items is less than that of a Medicaid 5.25 vendor. A county is not required to contract with a provider of 5.26 supplies and equipment if the monthly cost of the supplies and 5.27 equipment is less than $250. 5.28 (g) For purposes of this section, residential care services 5.29 are services which are provided to individuals living in 5.30 residential care homes. Residential care homes are currently 5.31 licensed as board and lodging establishments and are registered 5.32 with the department of health as providing special services. 5.33 Residential care services are defined as "supportive services" 5.34 and "health-related services." "Supportive services" means the 5.35 provision of up to 24-hour supervision and oversight. 5.36 Supportive services includes: (1) transportation, when provided 6.1 by the residential care center only; (2) socialization, when 6.2 socialization is part of the plan of care, has specific goals 6.3 and outcomes established, and is not diversional or recreational 6.4 in nature; (3) assisting clients in setting up meetings and 6.5 appointments; (4) assisting clients in setting up medical and 6.6 social services; (5) providing assistance with personal laundry, 6.7 such as carrying the client's laundry to the laundry room. 6.8 Assistance with personal laundry does not include any laundry, 6.9 such as bed linen, that is included in the room and board rate. 6.10 Health-related services are limited to minimal assistance with 6.11 dressing, grooming, and bathing and providing reminders to 6.12 residents to take medications that are self-administered or 6.13 providing storage for medications, if requested. Individuals 6.14 receiving residential care services cannot receive both personal 6.15 care services and residential care services. 6.16 (h) For the purposes of this section, "assisted living" 6.17 refers to supportive services provided by a single vendor to 6.18 clients who reside in the same apartment building of three or 6.19 more units which are not subject to registration under chapter 6.20 144D. Assisted living services are defined as up to 24-hour 6.21 supervision, and oversight, supportive services as defined in 6.22 clause (1), individualized home care aide tasks as defined in 6.23 clause (2), and individualized home management tasks as defined 6.24 in clause (3) provided to residents of a residential center 6.25 living in their units or apartments with a full kitchen and 6.26 bathroom. A full kitchen includes a stove, oven, refrigerator, 6.27 food preparation counter space, and a kitchen utensil storage 6.28 compartment. Assisted living services must be provided by the 6.29 management of the residential center or by providers under 6.30 contract with the management or with the county. 6.31 (1) Supportive services include: 6.32 (i) socialization, when socialization is part of the plan 6.33 of care, has specific goals and outcomes established, and is not 6.34 diversional or recreational in nature; 6.35 (ii) assisting clients in setting up meetings and 6.36 appointments; and 7.1 (iii) providing transportation, when provided by the 7.2 residential center only. 7.3 Individuals receiving assisted living services will not 7.4 receive both assisted living services and homemaking or personal 7.5 care services. Individualized means services are chosen and 7.6 designed specifically for each resident's needs, rather than 7.7 provided or offered to all residents regardless of their 7.8 illnesses, disabilities, or physical conditions. 7.9 (2) Home care aide tasks means: 7.10 (i) preparing modified diets, such as diabetic or low 7.11 sodium diets; 7.12 (ii) reminding residents to take regularly scheduled 7.13 medications or to perform exercises; 7.14 (iii) household chores in the presence of technically 7.15 sophisticated medical equipment or episodes of acute illness or 7.16 infectious disease; 7.17 (iv) household chores when the resident's care requires the 7.18 prevention of exposure to infectious disease or containment of 7.19 infectious disease; and 7.20 (v) assisting with dressing, oral hygiene, hair care, 7.21 grooming, and bathing, if the resident is ambulatory, and if the 7.22 resident has no serious acute illness or infectious disease. 7.23 Oral hygiene means care of teeth, gums, and oral prosthetic 7.24 devices. 7.25 (3) Home management tasks means: 7.26 (i) housekeeping; 7.27 (ii) laundry; 7.28 (iii) preparation of regular snacks and meals; and 7.29 (iv) shopping. 7.30 Assisted living services as defined in this section shall 7.31 not be authorized in boarding and lodging establishments 7.32 licensed according to sections 157.011 and 157.15 to 157.22. 7.33 (i) For establishments registered under chapter 144D, 7.34 assisted living services under this section means the services 7.35 described and licensed under section 144A.4605. 7.36 (j) For the purposes of this section, reimbursement for 8.1 assisted living services and residential care services shall be 8.2 a monthly rate negotiated and authorized by the county agency 8.3 based on an individualized service plan for each resident. The 8.4 rate shall not exceed the nonfederal share of the greater of 8.5 either the statewide or any of the geographic groups' weighted 8.6 average monthly medical assistance nursing facility payment rate 8.7 of the case mix resident class to which the 180-day eligible 8.8 client would be assigned under Minnesota Rules, parts 9549.0050 8.9 to 9549.0059, unless the services are provided by a home care 8.10 provider licensed by the department of health and are provided 8.11 in a building that is registered as a housing with services 8.12 establishment under chapter 144D and that provides 24-hour 8.13 supervision. 8.14 (k) For purposes of this section, companion services are 8.15 defined as nonmedical care, supervision and oversight, provided 8.16 to a functionally impaired adult. Companions may assist the 8.17 individual with such tasks as meal preparation, laundry and 8.18 shopping, but do not perform these activities as discrete 8.19 services. The provision of companion services does not entail 8.20 hands-on medical care. Providers may also perform light 8.21 housekeeping tasks which are incidental to the care and 8.22 supervision of the recipient. This service must be approved by 8.23 the case manager as part of the care plan. Companion services 8.24 must be provided by individuals ornonprofitorganizations who 8.25 are under contract with the local agency to provide the 8.26 service. Any person related to the waiver recipient by blood, 8.27 marriage or adoption cannot be reimbursed under this service. 8.28 Persons providing companion services will be monitored by the 8.29 case manager. 8.30 (l) For purposes of this section, training for direct 8.31 informal caregivers is defined as a classroom or home course of 8.32 instruction which may include: transfer and lifting skills, 8.33 nutrition, personal and physical cares, home safety in a home 8.34 environment, stress reduction and management, behavioral 8.35 management, long-term care decision making, care coordination 8.36 and family dynamics. The training is provided to an informal 9.1 unpaid caregiver of a 180-day eligible client which enables the 9.2 caregiver to deliver care in a home setting with high levels of 9.3 quality. The training must be approved by the case manager as 9.4 part of the individual care plan. Individuals, agencies, and 9.5 educational facilities which provide caregiver training and 9.6 education will be monitored by the case manager. 9.7 (m) A county agency may make payment from their alternative 9.8 care program allocation for other services provided to an 9.9 alternative care program recipient if those services prevent, 9.10 shorten, or delay institutionalization. These services may 9.11 include direct cash payments to the recipient for the purpose of 9.12 purchasing the recipient's services. The following provisions 9.13 apply to payments under this paragraph: 9.14 (1) a cash payment to a client under this provision cannot 9.15 exceed 50 percent of the monthly payment limit for that client 9.16 as specified in subdivision 4, paragraph (a), clause (7); 9.17 (2) a county may not approve any cash payment for a client 9.18 who has been assessed as having a dependency in orientation or 9.19 for a client who is concurrently receiving adult foster care, 9.20 residential care, or assisted living services; 9.21 (3) any service approved under this section must be a 9.22 service which meets the purpose and goals of the program as 9.23 listed in subdivision 1; and 9.24 (4) cash payments must also meet the criteria in section 9.25 256.476, subdivision 4, paragraph (b), and recipients of cash 9.26 grants must meet the requirements in section 256.476, 9.27 subdivision 10. 9.28 Upon implementation of direct cash payments to clients under 9.29 this section, any person determined eligible for the alternative 9.30 care program who chooses a cash payment approved by the county 9.31 agency shall receive the cash payment under this section and not 9.32 under section 256.476 unless the person was receiving a consumer 9.33 support grant under section 256.476 before implementation of 9.34 direct cash payments under this section. 9.35 Sec. 4. Minnesota Statutes 1998, section 256B.0913, 9.36 subdivision 10, is amended to read: 10.1 Subd. 10. [ALLOCATION FORMULA.] (a) The alternative care 10.2 appropriation for fiscal years 1992 and beyond shall cover only 10.3 180-day eligible clients. 10.4 (b) Prior to July 1 of each year, the commissioner shall 10.5 allocate to county agencies the state funds available for 10.6 alternative care for persons eligible under subdivision 2. The 10.7 allocation for fiscal year 1992 shall be calculated using a base 10.8 that is adjusted to exclude the medical assistance share of 10.9 alternative care expenditures. The adjusted base is calculated 10.10 by multiplying each county's allocation for fiscal year 1991 by 10.11 the percentage of county alternative care expenditures for 10.12 180-day eligible clients. The percentage is determined based on 10.13 expenditures for services rendered in fiscal year 1989 or 10.14 calendar year 1989, whichever is greater. 10.15 (c) If the county expenditures for 180-day eligible clients 10.16 are 95 percent or more of its adjusted base allocation, the 10.17 allocation for the next fiscal year is 100 percent of the 10.18 adjusted base, plus inflation to the extent that inflation is 10.19 included in the state budget. 10.20 (d) If the county expenditures for 180-day eligible clients 10.21 are less than 95 percent of its adjusted base allocation, the 10.22 allocation for the next fiscal year is the adjusted base 10.23 allocation less the amount of unspent funds below the 95 percent 10.24 level. 10.25 (e) For fiscal year 1992 only, a county may receive an 10.26 increased allocation if annualized service costs for the month 10.27 of May 1991 for 180-day eligible clients are greater than the 10.28 allocation otherwise determined. A county may apply for this 10.29 increase by reporting projected expenditures for May to the 10.30 commissioner by June 1, 1991. The amount of the allocation may 10.31 exceed the amount calculated in paragraph (b). The projected 10.32 expenditures for May must be based on actual 180-day eligible 10.33 client caseload and the individual cost of clients' care plans. 10.34 If a county does not report its expenditures for May, the amount 10.35 in paragraph (c) or (d) shall be used. 10.36 (f) Calculations for paragraphs (c) and (d) are to be made 11.1 as follows: for each county, the determination of expenditures 11.2 shall be based on payments for services rendered from April 1 11.3 through March 31 in the base year, to the extent that claims 11.4 have been submitted by June 1 of that year. Calculations for 11.5 paragraphs (c) and (d) must also include the funds transferred 11.6 to the consumer support grant program for clients who have 11.7 transferred to that program from April 1 through March 31 in the 11.8 base year. 11.9 (g) For the biennium ending June 30, 2001, the allocation 11.10 of state funds to county agencies shall be calculated as 11.11 described in paragraphs (c) and (d). If the annual legislative 11.12 appropriation for the alternative care program is inadequate to 11.13 fund the combined county allocations for fiscal year 2000 or 11.14 2001, the commissioner shall distribute to each county the 11.15 entire annual appropriation as that county's percentage of the 11.16 computed base as calculated in paragraph (f). 11.17 Sec. 5. Minnesota Statutes 1998, section 256B.0913, 11.18 subdivision 12, is amended to read: 11.19 Subd. 12. [CLIENT PREMIUMS.] (a) A premium is required for 11.20 all 180-day eligible clients to help pay for the cost of 11.21 participating in the program. The amount of the premium for the 11.22 alternative care client shall be determined as follows: 11.23 (1) when the alternative care client's income less 11.24 recurring and predictable medical expenses is greater than the 11.25 medical assistance income standard but less than 150 percent of 11.26 the federal poverty guideline, and total assets are less than 11.27$6,000$10,000, the fee is zero; 11.28 (2) when the alternative care client's income less 11.29 recurring and predictable medical expenses is greater than 150 11.30 percent of the federal poverty guideline, and total assets are 11.31 less than$6,000$10,000, the fee is 25 percent of the cost of 11.32 alternative care services or the difference between 150 percent 11.33 of the federal poverty guideline and the client's income less 11.34 recurring and predictable medical expenses, whichever is less; 11.35 and 11.36 (3) when the alternative care client's total assets are 12.1 greater than$6,000$10,000, the fee is 25 percent of the cost 12.2 of alternative care services. 12.3 For married persons, total assets are defined as the total 12.4 marital assets less the estimated community spouse asset 12.5 allowance, under section 256B.059, if applicable. For married 12.6 persons, total income is defined as the client's income less the 12.7 monthly spousal allotment, under section 256B.058. 12.8 All alternative care services except case management shall 12.9 be included in the estimated costs for the purpose of 12.10 determining 25 percent of the costs. 12.11 The monthly premium shall be calculated based on the cost 12.12 of the first full month of alternative care services and shall 12.13 continue unaltered until the next reassessment is completed or 12.14 at the end of 12 months, whichever comes first. Premiums are 12.15 due and payable each month alternative care services are 12.16 received unless the actual cost of the services is less than the 12.17 premium. 12.18 (b) The fee shall be waived by the commissioner when: 12.19 (1) a person who is residing in a nursing facility is 12.20 receiving case management only; 12.21 (2) a person is applying for medical assistance; 12.22 (3) a married couple is requesting an asset assessment 12.23 under the spousal impoverishment provisions; 12.24 (4) a person is a medical assistance recipient, but has 12.25 been approved for alternative care-funded assisted living 12.26 services; 12.27 (5) a person is found eligible for alternative care, but is 12.28 not yet receiving alternative care services; or 12.29 (6) a person's fee under paragraph (a) is less than $25. 12.30 (c) The county agency must collect the premium from the 12.31 client and forward the amounts collected to the commissioner in 12.32 the manner and at the times prescribed by the commissioner. 12.33 Money collected must be deposited in the general fund and is 12.34 appropriated to the commissioner for the alternative care 12.35 program. The client must supply the county with the client's 12.36 social security number at the time of application. If a client 13.1 fails or refuses to pay the premium due, the county shall supply 13.2 the commissioner with the client's social security number and 13.3 other information the commissioner requires to collect the 13.4 premium from the client. The commissioner shall collect unpaid 13.5 premiums using the Revenue Recapture Act in chapter 270A and 13.6 other methods available to the commissioner. The commissioner 13.7 may require counties to inform clients of the collection 13.8 procedures that may be used by the state if a premium is not 13.9 paid. 13.10 (d) The commissioner shall begin to adopt emergency or 13.11 permanent rules governing client premiums within 30 days after 13.12 July 1, 1991, including criteria for determining when services 13.13 to a client must be terminated due to failure to pay a premium. 13.14 Sec. 6. Minnesota Statutes 1998, section 256B.0913, 13.15 subdivision 16, is amended to read: 13.16 Subd. 16. [CONVERSION OF ENROLLMENT.] Upon approval of the 13.17 elderly waiver amendments described in section 256B.0915, 13.18 subdivision 1d, persons currently receiving services shall have 13.19 their eligibility for the elderly waiver program determined 13.20 under section 256B.0915. Persons currently receiving 13.21 alternative care services whose income is under the special 13.22 income standard according to Code of Federal Regulations, title 13.23 42, section 435.236, who are eligible for the elderly waiver 13.24 programshallmay, at their option, be transferred to that 13.25 program and shall receive priority access to elderly waiver 13.26 slots for six months after implementation of this subdivision. 13.27 Persons currently enrolled in the alternative care program who 13.28 are not eligible for the elderly waiver program shall continue 13.29 to be eligible for the alternative care program.as long as13.30continuous eligibility is maintained. Continued eligibility for13.31the alternative care program shall be reviewed every six13.32months. Persons who apply for the alternative care program13.33after approval of the elderly waiver amendments in section13.34256B.0915, subdivision 1d, are not eligible for alternative care13.35if they would qualify for the elderly waiver, with or without a13.36spenddown.14.1 Sec. 7. Minnesota Statutes 1998, section 256B.434, 14.2 subdivision 3, is amended to read: 14.3 Subd. 3. [DURATION AND TERMINATION OF CONTRACTS.] (a) 14.4 Subject to available resources, the commissioner may begin to 14.5 execute contracts with nursing facilities November 1, 1995. 14.6 (b) All contracts entered into under this section are for a 14.7 term of one year. Either party may terminate a contract at any 14.8 time without cause by providing3090 calendar days advance 14.9 written notice to the other party. The decision to terminate a 14.10 contract is not appealable.If neither party provides written14.11notice of termination the contract shall be renegotiated for14.12additional one-year terms, for up to a total of four consecutive14.13one-year termsNotwithstanding section 16C.05, subdivision 2, 14.14 paragraph (a), clause (5), the contract shall be renegotiated 14.15 for additional one-year terms, unless either party provides 14.16 written notice of termination. The provisions of the contract 14.17 shall be renegotiated annually by the parties prior to the 14.18 expiration date of the contract. The parties may voluntarily 14.19 renegotiate the terms of the contract at any time by mutual 14.20 agreement. 14.21 (c) If a nursing facility fails to comply with the terms of 14.22 a contract, the commissioner shall provide reasonable notice 14.23 regarding the breach of contract and a reasonable opportunity 14.24 for the facility to come into compliance. If the facility fails 14.25 to come into compliance or to remain in compliance, the 14.26 commissioner may terminate the contract. If a contract is 14.27 terminated, the contract payment remains in effect for the 14.28 remainder of the rate year in which the contract was terminated, 14.29 but in all other respects the provisions of this section do not 14.30 apply to that facility effective the date the contract is 14.31 terminated.The contract shall contain a provision governing14.32the transition back to the cost-based reimbursement system14.33established under section 256B.431, subdivision 25, and14.34Minnesota Rules, parts 9549.0010 to 9549.0080.A contract 14.35 entered into under this section may be amended by mutual 14.36 agreement of the parties. 15.1 Sec. 8. Minnesota Statutes 1998, section 256B.434, 15.2 subdivision 13, is amended to read: 15.3 Subd. 13. [PAYMENT SYSTEM REFORM ADVISORY COMMITTEE.](a)15.4 The commissioner, in consultation with an advisory committee, 15.5 shall study options for reforming the regulatory and 15.6 reimbursement system for nursing facilities to reduce the level 15.7 of regulation, reporting, and procedural requirements, and to 15.8 provide greater flexibility and incentives to stimulate 15.9 competition and innovation. The advisory committee shall 15.10 include, at a minimum, representatives from the long-term care 15.11 provider community, the department of health, and consumers of 15.12 long-term care services.The advisory committee sunsets on June15.1330, 1997.Among other things, the commissioner shall consider 15.14 the feasibility and desirability of changing from a 15.15 certification requirement to an accreditation requirement for 15.16 participation in the medical assistance program, options to 15.17 encourage early discharge of short-term residents through the 15.18 provision of intensive therapy, and further modifications needed 15.19 in rate equalization. The commissioner shall also include 15.20 detailed recommendations for a permanent managed care payment 15.21 system to replace the contractual alternative payment 15.22 demonstration project authorized under this section. The 15.23 commissioner shall submit a report with findings and 15.24 recommendations to the legislature by January 15, 1997. 15.25(b) If a permanent managed care payment system has not been15.26enacted into law by July 1, 1997, the commissioner shall develop15.27and implement a transition plan to enable nursing facilities15.28under contract with the commissioner under this section to15.29revert to the cost-based payment system at the expiration of the15.30alternative payment demonstration project. The commissioner15.31shall include in the alternative payment demonstration project15.32contracts entered into under this section a provision to permit15.33an amendment to the contract to be made after July 1, 1997,15.34governing the transition back to the cost-based payment system.15.35The transition plan and contract amendments are not subject to15.36rulemaking requirements.16.1 Sec. 9. Minnesota Statutes 1998, section 256B.48, 16.2 subdivision 1, is amended to read: 16.3 Subdivision 1. [PROHIBITED PRACTICES.] A nursing facility 16.4 is not eligible to receive medical assistance payments unless it 16.5 refrains from all of the following: 16.6 (a) Charging private paying residents rates for similar 16.7 services which exceed those which are approved by the state 16.8 agency for medical assistance recipients as determined by the 16.9 prospectivedesk auditrate under section 256B.435, except under 16.10 the following circumstances: the nursing facility may (1) 16.11 charge private paying residents a higher rate for a private 16.12 room, and (2) charge for special services which are not included 16.13 in the daily rate if medical assistance residents are charged 16.14 separately at the same rate for the same services in addition to 16.15 the daily rate paid by the commissioner. Services covered by 16.16 the payment rate must be the same regardless of payment source. 16.17 Special services, if offered, must be available to all residents 16.18 in all areas of the nursing facility and charged separately at 16.19 the same rate. Residents are free to select or decline special 16.20 services. Special services must not include services which must 16.21 be provided by the nursing facility in order to comply with 16.22 licensure or certification standards and that if not provided 16.23 would result in a deficiency or violation by the nursing 16.24 facility. Services beyond those required to comply with 16.25 licensure or certification standards must not be charged 16.26 separately as a special service if they were included in the 16.27 payment rate for the previous reporting year. A nursing 16.28 facility that charges a private paying resident a rate in 16.29 violation of this clause is subject to an action by the state of 16.30 Minnesota or any of its subdivisions or agencies for civil 16.31 damages. A private paying resident or the resident's legal 16.32 representative has a cause of action for civil damages against a 16.33 nursing facility that charges the resident rates in violation of 16.34 this clause. The damages awarded shall include three times the 16.35 payments that result from the violation, together with costs and 16.36 disbursements, including reasonable attorneys' fees or their 17.1 equivalent. A private paying resident or the resident's legal 17.2 representative, the state, subdivision or agency, or a nursing 17.3 facility may request a hearing to determine the allowed rate or 17.4 rates at issue in the cause of action. Within 15 calendar days 17.5 after receiving a request for such a hearing, the commissioner 17.6 shall request assignment of an administrative law judge under 17.7 sections 14.48 to 14.56 to conduct the hearing as soon as 17.8 possible or according to agreement by the parties. The 17.9 administrative law judge shall issue a report within 15 calendar 17.10 days following the close of the hearing. The prohibition set 17.11 forth in this clause shall not apply to facilities licensed as 17.12 boarding care facilities which are not certified as skilled or 17.13 intermediate care facilities level I or II for reimbursement 17.14 through medical assistance. 17.15 (b)(1)RequiringCharging, soliciting, accepting, or 17.16 receiving from an applicant for admission to the facility, or 17.17the guardian or conservatorfrom anyone acting in behalf of the 17.18 applicant, as a condition of admission,to payexpediting the 17.19 admission, or as a requirement for the individual's continued 17.20 stay, any feeor, depositin excess of $100, gift, money, 17.21 donation, or other consideration; 17.22 (2) requiring an individual, or anyone acting in behalf of 17.23 the individual, to loan any money to the nursing facility, or; 17.24 (3) requiring an individual, or anyone acting in behalf of 17.25 the individual, to promise to leave all or part of the 17.26applicant'sindividual's estate to the facility; or 17.27 (4) requiring a third-party guarantee of payment to the 17.28 facility as a condition of admission, expedited admission, or 17.29 continued stay in the facility. 17.30 (c) requiring any resident of the nursing facility to 17.31 utilize a vendor of health care services chosen by the nursing 17.32 facility. 17.33 (d) Providing differential treatment on the basis of status 17.34 with regard to public assistance. 17.35 (e) Discriminating in admissions, services offered, or room 17.36 assignment on the basis of status with regard to public 18.1 assistance or refusal to purchase special services. Admissions 18.2 discrimination shall include, but is not limited to: 18.3 (1) basing admissions decisions upon assurance by the 18.4 applicant to the nursing facility, or the applicant's guardian 18.5 or conservator, that the applicant is neither eligible for nor 18.6 will seek public assistance for payment of nursing facility care 18.7 costs; and 18.8 (2) engaging in preferential selection from waiting lists 18.9 based on an applicant's ability to pay privately or an 18.10 applicant's refusal to pay for a special service. 18.11 The collection and use by a nursing facility of financial 18.12 information of any applicant pursuant to a preadmission 18.13 screening program established by law shall not raise an 18.14 inference that the nursing facility is utilizing that 18.15 information for any purpose prohibited by this paragraph. 18.16 (f) Requiring any vendor of medical care as defined by 18.17 section 256B.02, subdivision 7, who is reimbursed by medical 18.18 assistance under a separate fee schedule, to pay any amount 18.19 based on utilization or service levels or any portion of the 18.20 vendor's fee to the nursing facility except as payment for 18.21 renting or leasing space or equipment or purchasing support 18.22 services from the nursing facility as limited by section 18.23 256B.433. All agreements must be disclosed to the commissioner 18.24 upon request of the commissioner. Nursing facilities and 18.25 vendors of ancillary services that are found to be in violation 18.26 of this provision shall each be subject to an action by the 18.27 state of Minnesota or any of its subdivisions or agencies for 18.28 treble civil damages on the portion of the fee in excess of that 18.29 allowed by this provision and section 256B.433. Damages awarded 18.30 must include three times the excess payments together with costs 18.31 and disbursements including reasonable attorney's fees or their 18.32 equivalent. 18.33 (g) Refusing, for more than 24 hours, to accept a resident 18.34 returning to the same bed or a bed certified for the same level 18.35 of care, in accordance with a physician's order authorizing 18.36 transfer, after receiving inpatient hospital services. 19.1The prohibitions set forth in clause (b) shall not apply to19.2a retirement facility with more than 325 beds including at least19.3150 licensed nursing facility beds and which:19.4(1) is owned and operated by an organization tax-exempt19.5under section 290.05, subdivision 1, clause (i); and19.6(2) accounts for all of the applicant's assets which are19.7required to be assigned to the facility so that only expenses19.8for the cost of care of the applicant may be charged against the19.9account; and19.10(3) agrees in writing at the time of admission to the19.11facility to permit the applicant, or the applicant's guardian,19.12or conservator, to examine the records relating to the19.13applicant's account upon request, and to receive an audited19.14statement of the expenditures charged against the applicant's19.15individual account upon request; and19.16(4) agrees in writing at the time of admission to the19.17facility to permit the applicant to withdraw from the facility19.18at any time and to receive, upon withdrawal, the balance of the19.19applicant's individual account.19.20 For a period not to exceed 180 days, the commissioner may 19.21 continue to make medical assistance payments to a nursing 19.22 facility or boarding care home which is in violation of this 19.23 section if extreme hardship to the residents would result. In 19.24 these cases the commissioner shall issue an order requiring the 19.25 nursing facility to correct the violation. The nursing facility 19.26 shall have 20 days from its receipt of the order to correct the 19.27 violation. If the violation is not corrected within the 20-day 19.28 period the commissioner may reduce the payment rate to the 19.29 nursing facility by up to 20 percent. The amount of the payment 19.30 rate reduction shall be related to the severity of the violation 19.31 and shall remain in effect until the violation is corrected. 19.32 The nursing facility or boarding care home may appeal the 19.33 commissioner's action pursuant to the provisions of chapter 14 19.34 pertaining to contested cases. An appeal shall be considered 19.35 timely if written notice of appeal is received by the 19.36 commissioner within 20 days of notice of the commissioner's 20.1 proposed action. 20.2 In the event that the commissioner determines that a 20.3 nursing facility is not eligible for reimbursement for a 20.4 resident who is eligible for medical assistance, the 20.5 commissioner may authorize the nursing facility to receive 20.6 reimbursement on a temporary basis until the resident can be 20.7 relocated to a participating nursing facility. 20.8 Certified beds in facilities which do not allow medical 20.9 assistance intake on July 1, 1984, or after shall be deemed to 20.10 be decertified for purposes of section 144A.071 only. 20.11 Sec. 10. Minnesota Statutes 1998, section 256I.04, 20.12 subdivision 3, is amended to read: 20.13 Subd. 3. [MORATORIUM ON THE DEVELOPMENT OF GROUP 20.14 RESIDENTIAL HOUSING BEDS.] (a) County agencies shall not enter 20.15 into agreements for new group residential housing beds with 20.16 total rates in excess of the MSA equivalent rate except: (1) 20.17 for group residential housing establishments meeting the 20.18 requirements of subdivision 2a, clause (2) with department 20.19 approval; (2) for group residential housing establishments 20.20 licensed under Minnesota Rules, parts 9525.0215 to 9525.0355, 20.21 provided the facility is needed to meet the census reduction 20.22 targets for persons with mental retardation or related 20.23 conditions at regional treatment centers; (3) to ensure 20.24 compliance with the federal Omnibus Budget Reconciliation Act 20.25 alternative disposition plan requirements for inappropriately 20.26 placed persons with mental retardation or related conditions or 20.27 mental illness; (4) up to 80 beds in a single, specialized 20.28 facility located in Hennepin county that will provide housing 20.29 for chronic inebriates who are repetitive users of 20.30 detoxification centers and are refused placement in emergency 20.31 shelters because of their state of intoxication, and planning 20.32 for the specialized facility must have been initiated before 20.33 July 1, 1991, in anticipation of receiving a grant from the 20.34 housing finance agency under section 462A.05, subdivision 20a, 20.35 paragraph (b);or(5) notwithstanding the provisions of 20.36 subdivision 2a, for up to 190 supportive housing units in Anoka, 21.1 Dakota, Hennepin, or Ramsey county for homeless adults with a 21.2 mental illness, a history of substance abuse, or human 21.3 immunodeficiency virus or acquired immunodeficiency syndrome. 21.4 For purposes of this section, "homeless adult" means a person 21.5 who is living on the street or in a shelter or discharged from a 21.6 regional treatment center, community hospital, or residential 21.7 treatment program and has no appropriate housing available and 21.8 lacks the resources and support necessary to access appropriate 21.9 housing. At least 70 percent of the supportive housing units 21.10 must serve homeless adults with mental illness, substance abuse 21.11 problems, or human immunodeficiency virus or acquired 21.12 immunodeficiency syndrome who are about to be or, within the 21.13 previous six months, has been discharged from a regional 21.14 treatment center, or a state-contracted psychiatric bed in a 21.15 community hospital, or a residential mental health or chemical 21.16 dependency treatment program. If a person meets the 21.17 requirements of subdivision 1, paragraph (a), and receives a 21.18 federal or state housing subsidy, the group residential housing 21.19 rate for that person is limited to the supplementary rate under 21.20 section 256I.05, subdivision 1a, and is determined by 21.21 subtracting the amount of the person's countable income that 21.22 exceeds the MSA equivalent rate from the group residential 21.23 housing supplementary rate. A resident in a demonstration 21.24 project site who no longer participates in the demonstration 21.25 program shall retain eligibility for a group residential housing 21.26 payment in an amount determined under section 256I.06, 21.27 subdivision 8, using the MSA equivalent rate. Service funding 21.28 under section 256I.05, subdivision 1a, will end June 30, 1997, 21.29 if federal matching funds are available and the services can be 21.30 provided through a managed care entity. If federal matching 21.31 funds are not available, then service funding will continue 21.32 under section 256I.05, subdivision 1a.; or (6) for group 21.33 residential housing beds in settings meeting the requirements of 21.34 subdivision 2, paragraph (a), clause (3), which are used 21.35 exclusively for recipients receiving elderly waiver services 21.36 under section 256B.0915 and who resided in a nursing facility 22.1 for the six months immediately prior to the month of entry into 22.2 the group residential housing setting. The group residential 22.3 housing rate for these beds must be set so that the monthly 22.4 group residential housing payment for an individual occupying 22.5 the bed when combined with the nonfederal share of services 22.6 delivered under the waiver for that person does not exceed the 22.7 nonfederal share of the monthly medical assistance payment made 22.8 for the person to the nursing facility in which the person 22.9 resided prior to entry into the group residential housing 22.10 establishment. The rate may not exceed the MSA equivalent rate 22.11 plus $426.37 for any case. 22.12 (b) A county agency may enter into a group residential 22.13 housing agreement for beds with rates in excess of the MSA 22.14 equivalent rate in addition to those currently covered under a 22.15 group residential housing agreement if the additional beds are 22.16 only a replacement of beds with rates in excess of the MSA 22.17 equivalent rate which have been made available due to closure of 22.18 a setting, a change of licensure or certification which removes 22.19 the beds from group residential housing payment, or as a result 22.20 of the downsizing of a group residential housing setting. The 22.21 transfer of available beds from one county to another can only 22.22 occur by the agreement of both counties. 22.23 Sec. 11. Minnesota Statutes 1998, section 256I.05, 22.24 subdivision 1, is amended to read: 22.25 Subdivision 1. [MAXIMUM RATES.] Monthly room and board 22.26 rates negotiated by a county agency for a recipient living in 22.27 group residential housing must not exceed the MSA equivalent 22.28 rate specified under section 256I.03, subdivision 5, with the 22.29 exception that a county agency may negotiate a supplementary 22.30 room and board rate that exceeds the MSA equivalent rateby up22.31to $426.37for recipients of waiver services under title XIX of 22.32 the Social Security Act. This exception is subject to the 22.33 following conditions: 22.34 (1)that the Secretary of Health and Human Services has not22.35approved a state request to include room and board costs which22.36exceed the MSA equivalent rate in an individual's set of waiver23.1services under title XIX of the Social Security Act; or23.2(2) that the Secretary of Health and Human Services has23.3approved the inclusion of room and board costs which exceed the23.4MSA equivalent rate, but in an amount that is insufficient to23.5cover costs which are included in a group residential housing23.6agreement in effect on June 30, 1994; and23.7(3) the amount of the rate that is above the MSA equivalent23.8rate has been approved by the commissionerthe setting is 23.9 licensed by the commissioner of human services under Minnesota 23.10 Rules, parts 9555.5050 to 9555.6265; 23.11 (2) the setting is not the primary residence of the license 23.12 holder and in which the license holder is not the primary 23.13 caregiver; and 23.14 (3) the average supplementary room and board rate in a 23.15 county for a calendar year may not exceed the average 23.16 supplementary room and board rate for that county in effect on 23.17 January 1, 2000. 23.18 The county agency may at any time negotiate a higher or lower 23.19 room and board rate than the average supplementary room and 23.20 board ratethat would otherwise be paid under this subdivision. 23.21 Sec. 12. Minnesota Statutes 1998, section 256I.05, 23.22 subdivision 1a, is amended to read: 23.23 Subd. 1a. [SUPPLEMENTARY SERVICE RATES.] (a) Subject to 23.24 the provisions of section 256I.04, subdivision 3, in addition to 23.25 the room and board rate specified in subdivision 1, the county 23.26 agency may negotiate a payment not to exceed $426.37 for other 23.27 services necessary to provide room and board provided by the 23.28 group residence if the residence is licensed by or registered by 23.29 the department of health, or licensed by the department of human 23.30 services to provide services in addition to room and board, and 23.31 if the provider of services is not also concurrently receiving 23.32 funding for services for a recipient under a home and 23.33 community-based waiver under title XIX of the Social Security 23.34 Act; or funding from the medical assistance program under 23.35 section 256B.0627, subdivision 4, for personal care services for 23.36 residents in the setting; or residing in a setting which 24.1 receives funding under Minnesota Rules, parts 9535.2000 to 24.2 9535.3000. If funding is available for other necessary services 24.3 through a home and community-based waiver, or personal care 24.4 services under section 256B.0627, subdivision 4, then the GRH 24.5 rate is limited to the rate set in subdivision 1. Unless 24.6 otherwise provided in law, in no case may the supplementary 24.7 service rate plus the supplementary room and board rate exceed 24.8 $426.37. The registration and licensure requirement does not 24.9 apply to establishments which are exempt from state licensure 24.10 because they are located on Indian reservations and for which 24.11 the tribe has prescribed health and safety requirements. 24.12 Service payments under this section may be prohibited under 24.13 rules to prevent the supplanting of federal funds with state 24.14 funds. The commissioner shall pursue the feasibility of 24.15 obtaining the approval of the Secretary of Health and Human 24.16 Services to provide home and community-based waiver services 24.17 under title XIX of the Social Security Act for residents who are 24.18 not eligible for an existing home and community-based waiver due 24.19 to a primary diagnosis of mental illness or chemical dependency 24.20 and shall apply for a waiver if it is determined to be 24.21 cost-effective. 24.22 (b) The commissioner is authorized to make cost-neutral 24.23 transfers from the GRH fund for beds under this section to other 24.24 funding programs administered by the department after 24.25 consultation with the county or counties in which the affected 24.26 beds are located. The commissioner may also make cost-neutral 24.27 transfers from the GRH fund to county human service agencies for 24.28 beds permanently removed from the GRH census under a plan 24.29 submitted by the county agency and approved by the 24.30 commissioner. The commissioner shall report the amount of any 24.31 transfers under this provision annually to the legislature. 24.32 (c) The provisions of paragraph (b) do not apply to a 24.33 facility that has its reimbursement rate established under 24.34 section 256B.431, subdivision 4, paragraph (c). 24.35 Sec. 13. [REPEALER.] 24.36 Minnesota Statutes 1998, section 256B.434, subdivision 17, 25.1 is repealed effective July 1, 1999. 25.2 Sec. 14. [EFFECTIVE DATE.] 25.3 (a) Sections 1 to 8 and 10 to 12 are effective July 1, 1999. 25.4 (b) Section 9, the amendment to Minnesota Statutes, section 25.5 256B.48, subdivision 1, paragraph (a), is effective July 1, 25.6 2000. Section 9, the amendments to Minnesota Statutes, section 25.7 256B.48, subdivision 1, paragraphs (b) and (g), are effective 25.8 July 1, 1999. 25.9 ARTICLE 2 25.10 NURSING FACILITIES 25.11 Section 1. Minnesota Statutes 1998, section 256B.421, 25.12 subdivision 9, is amended to read: 25.13 Subd. 9. [PAYMENT RATE.] "Payment rate" means the rate 25.14 determined under section256B.431256B.435. 25.15 Sec. 2. Minnesota Statutes 1998, section 256B.421, 25.16 subdivision 11, is amended to read: 25.17 Subd. 11. [RATE YEAR.] "Rate year" means the fiscal year 25.18 for which a payment rate determined under section256B.43125.19 256B.435 is effective, from July 1 to the next June 30. 25.20 Sec. 3. Minnesota Statutes 1998, section 256B.431, 25.21 subdivision 1, is amended to read: 25.22 Subdivision 1. [IN GENERAL.] The commissioner shall 25.23 determine prospective payment rates for resident care costs.In25.24determining the rates, the commissioner shall group nursing25.25facilities according to different levels of care and geographic25.26location until July 1, 1985.For rates established on or after 25.27 July 1, 1985, the commissioner shall develop procedures for 25.28 determining operating cost payment rates that take into account 25.29 the mix of resident needs, geographic location, and other 25.30 factors as determined by the commissioner. Effective for rates 25.31 established on or after July 1, 2000, the rules developed under 25.32 this subdivision shall be used to set property rates according 25.33 to section 256B.435, for newly constructed or newly established 25.34 facilities, and to determine case-mix assessments for 25.35 residents. The commissioner shall consider whether the fact 25.36 that a facility is attached to a hospital or has an average 26.1 length of stay of 180 days or less should be taken into account 26.2 in determining rates. The commissioner shall consider the use 26.3 of the standard metropolitan statistical areas when developing 26.4 groups by geographic location.Until the commissioner26.5establishes procedures for determining operating cost payment26.6rates, the commissioner shall group all convalescent and nursing26.7care units attached to hospitals into one group for purposes of26.8determining reimbursement for operating costs. On or before26.9June 15, 1983, the commissioner shall mail notices to each26.10nursing facility of the rates to be effective from July 1 of26.11that year to June 30 of the following year. In subsequent26.12years,The commissioner shall provide notice to each nursing 26.13 facility on or before May 1 of the rates effective for the 26.14 following rate year. Ifa statute enacted after May 1 affects26.15the rates, the commissioner shall provide a revised notice to26.16each nursing facility as soon as possiblethere is pending 26.17 legislation on May 1 that will affect rates for nursing 26.18 facilities, the commissioner will set the rates as soon as 26.19 possible after the legislation is enacted. 26.20The commissioner shall establish, by rule, limitations on26.21compensation recognized in the historical base for top26.22management personnel. For rate years beginning July 1, 1985,26.23the commissioner shall not provide, by rule, limitations on top26.24management personnel.Compensation for top management personnel 26.25 shall continue to be categorized as a general and administrative 26.26 cost and is subject to any limits imposed on that cost 26.27 category.The commissioner shall also establish, by rule,26.28limitations on allowable nursing hours for each level of care26.29for the rate years beginning July 1, 1983 and July 1, 1984. For26.30the rate year beginning July 1, 1984, nursing facilities in26.31which the nursing hours exceeded 2.9 hours per day for skilled26.32nursing care or 2.3 hours per day for intermediate care for the26.33reporting year ending on September 30, 1983, shall be limited to26.34a maximum of 3.2 hours per day for skilled nursing care and 2.626.35hours per day for intermediate care.26.36 Sec. 4. Minnesota Statutes 1998, section 256B.431, 27.1 subdivision 2b, is amended to read: 27.2 Subd. 2b. [OPERATING COSTS, AFTER JULY 1, 1985.] (a) For 27.3 rate years beginning on or after July 1, 1985, the commissioner 27.4 shall establish procedures for determining per diem 27.5 reimbursement for operating costs. 27.6 (b) The commissioner shall contract with an econometric 27.7 firm with recognized expertise in and access to national 27.8 economic change indices that can be applied to the appropriate 27.9 cost categories when determining the operating cost payment rate. 27.10 (c) The commissioner shall analyze and evaluate each 27.11 nursing facility's cost report of allowable operating costs 27.12 incurred by the nursing facility during the reporting year 27.13 immediately preceding the rate year for which the payment rate 27.14 becomes effective. 27.15 (d) The commissioner shall establish limits on actual 27.16 allowable historical operating cost per diems based on cost 27.17 reports of allowable operating costs for the reporting year that 27.18 begins October 1, 1983, taking into consideration relevant 27.19 factors including resident needs, geographic location, and size 27.20 of the nursing facility. In developing the geographic groups 27.21 for purposes of reimbursement under this section, the 27.22 commissioner shall ensure that nursing facilities in any county 27.23 contiguous to the Minneapolis-St. Paul seven-county metropolitan 27.24 area are included in the same geographic group. The limits 27.25 established by the commissioner shall not be less, in the 27.26 aggregate, than the 60th percentile of total actual allowable 27.27 historical operating cost per diems for each group of nursing 27.28 facilities established under subdivision 1 based on cost reports 27.29 of allowable operating costs in the previous reporting year. 27.30 For rate years beginning on or after July 1, 1989, facilities 27.31 located in geographic group I as described in Minnesota Rules, 27.32 part 9549.0052, on January 1, 1989, may choose to have the 27.33 commissioner apply either the care related limits or the other 27.34 operating cost limits calculated for facilities located in 27.35 geographic group II, or both, if either of the limits calculated 27.36 for the group II facilities is higher. The efficiency incentive 28.1 for geographic group I nursing facilities must be calculated 28.2 based on geographic group I limits. The phase-in must be 28.3 established utilizing the chosen limits. For purposes of these 28.4 exceptions to the geographic grouping requirements, the 28.5 definitions in Minnesota Rules, parts 9549.0050 to 9549.0059 28.6 (Emergency), and 9549.0010 to 9549.0080, apply. The limits 28.7 established under this paragraph remain in effect until the 28.8 commissioner establishes a new base period. Until the new base 28.9 period is established, the commissioner shall adjust the limits 28.10 annually using the appropriate economic change indices 28.11 established in paragraph (e). In determining allowable 28.12 historical operating cost per diems for purposes of setting 28.13 limits and nursing facility payment rates, the commissioner 28.14 shall divide the allowable historical operating costs by the 28.15 actual number of resident days, except that where a nursing 28.16 facility is occupied at less than 90 percent of licensed 28.17 capacity days, the commissioner may establish procedures to 28.18 adjust the computation of the per diem to an imputed occupancy 28.19 level at or below 90 percent. The commissioner shall establish 28.20 efficiency incentives as appropriate. The commissioner may 28.21 establish efficiency incentives for different operating cost 28.22 categories. The commissioner shall consider establishing 28.23 efficiency incentives in care related cost categories. The 28.24 commissioner may combine one or more operating cost categories 28.25 and may use different methods for calculating payment rates for 28.26 each operating cost category or combination of operating cost 28.27 categories.For the rate year beginning on July 1, 1985, the28.28commissioner shall:28.29(1) allow nursing facilities that have an average length of28.30stay of 180 days or less in their skilled nursing level of care,28.31125 percent of the care related limit and 105 percent of the28.32other operating cost limit established by rule; and28.33(2) exempt nursing facilities licensed on July 1, 1983, by28.34the commissioner to provide residential services for the28.35physically handicapped under Minnesota Rules, parts 9570.2000 to28.369570.3600, from the care related limits and allow 105 percent of29.1the other operating cost limit established by rule.29.2For the purpose of calculating the other operating cost29.3efficiency incentive for nursing facilities referred to in29.4clause (1) or (2), the commissioner shall use the other29.5operating cost limit established by rule before application of29.6the 105 percent.29.7 (e) The commissioner shall establish a composite index or 29.8 indices by determining the appropriate economic change 29.9 indicators to be applied to specific operating cost categories 29.10 or combination of operating cost categories. 29.11 (f) Each nursing facility shall receive an operating cost 29.12 payment rate equal to the sum of the nursing facility's 29.13 operating cost payment rates for each operating cost category. 29.14 The operating cost payment rate for an operating cost category 29.15 shall be the lesser of the nursing facility's historical 29.16 operating cost in the category increased by the appropriate 29.17 index established in paragraph (e) for the operating cost 29.18 category plus an efficiency incentive established pursuant to 29.19 paragraph (d) or the limit for the operating cost category 29.20 increased by the same index. If a nursing facility's actual 29.21 historic operating costs are greater than the prospective 29.22 payment rate for that rate year, there shall be no retroactive 29.23 cost settle-up. In establishing payment rates for one or more 29.24 operating cost categories, the commissioner may establish 29.25 separate rates for different classes of residents based on their 29.26 relative care needs. 29.27 (g) The commissioner shall include the reported actual real 29.28 estate tax liability or payments in lieu of real estate tax of 29.29 each nursing facilityas an operating cost of that nursing29.30facility. Allowable costs under this subdivision for payments 29.31 made by a nonprofit nursing facility that are in lieu of real 29.32 estate taxes shall not exceed the amount which the nursing 29.33 facility would have paid to a city or township and county for 29.34 fire, police, sanitation services, and road maintenance costs 29.35 had real estate taxes been levied on that property for those 29.36 purposes. For rate years beginning on or after July 1, 1987, 30.1 the reported actual real estate tax liability or payments in 30.2 lieu of real estate tax of nursing facilities shall be adjusted 30.3 to include an amount equal to one-half of the dollar change in 30.4 real estate taxes from the prior year. The commissioner shall 30.5 include a reported actual special assessment, and reported 30.6 actual license fees required by the Minnesota department of 30.7 health, for each nursing facility as an operating cost of that 30.8 nursing facility. For rate years beginning on or after July 1, 30.9 1989, the commissioner shall include a nursing facility's 30.10 reported Public Employee Retirement Act contribution for the 30.11 reporting year as apportioned to the care-related operating cost 30.12 categories and other operating cost categories multiplied by the 30.13 appropriate composite index or indices established pursuant to 30.14 paragraph (e) as costs under this paragraph. Total adjusted 30.15 real estate tax liability, payments in lieu of real estate tax, 30.16 actual special assessments paid, the indexed Public Employee 30.17 Retirement Act contribution, and license fees paid as required 30.18 by the Minnesota department of health, for each nursing facility 30.19 (1) shall be divided by actual resident days in order to compute 30.20 the operating cost payment rate for this operating cost 30.21 category, (2) shall not be used to compute the care-related 30.22 operating cost limits or other operating cost limits established 30.23 by the commissioner, and (3) shall not be increased by the 30.24 composite index or indices established pursuant to paragraph 30.25 (e), unless otherwise indicated in this paragraph. 30.26 (h) For rate years beginning on or after July 1, 1987, the 30.27 commissioner shall adjust the rates of a nursing facility that 30.28 meets the criteria for the special dietary needs of its 30.29 residents and the requirements in section 31.651. The 30.30 adjustment for raw food cost shall be the difference between the 30.31 nursing facility's allowable historical raw food cost per diem 30.32 and 115 percent of the median historical allowable raw food cost 30.33 per diem of the corresponding geographic group. 30.34 The rate adjustment shall be reduced by the applicable 30.35 phase-in percentage as provided under subdivision 2h. 30.36 Sec. 5. Minnesota Statutes 1998, section 256B.431, 31.1 subdivision 2d, is amended to read: 31.2 Subd. 2d.If an annual cost report or field audit31.3indicates that expenditures for direct resident care have been31.4reduced in amounts large enough to indicate a possible31.5detrimental effect on the quality of care, the commissioner31.6shall notify the commissioner of health and the interagency31.7long-term care planning committee.If a field audit reveals 31.8 that unallowable expenditures have been included in the nursing 31.9 facility's historical operating costs, the commissioner shall 31.10 disallow the expenditures and recover the entire overpayment. 31.11 The commissioner shall establish, by rule, procedures for 31.12 assessing an interest charge at the rate determined for unpaid 31.13 taxes or penalties under section 270.75 on any outstanding 31.14 balance resulting from an overpayment or underpayment. 31.15 Sec. 6. Minnesota Statutes 1998, section 256B.431, 31.16 subdivision 2i, is amended to read: 31.17 Subd. 2i. [OPERATING COSTS AFTER JULY 1, 1988.] (a) 31.18 [OTHER OPERATING COST LIMITS.]For the rate year beginning July31.191, 1988, the commissioner shall increase the other operating31.20cost limits established in Minnesota Rules, part 9549.0055,31.21subpart 2, item E, to 110 percent of the median of the array of31.22allowable historical other operating cost per diems and index31.23these limits as in Minnesota Rules, part 9549.0056, subparts 331.24and 4. The limits must be established in accordance with31.25subdivision 2b, paragraph (d).For rate years beginning on or 31.26 after July 1, 1989, the adjusted other operating cost limits 31.27 must be indexed as in Minnesota Rules, part 9549.0056, subparts 31.28 3 and 4. For the rate period beginning October 1, 1992, and for 31.29 rate years beginning after June 30, 1993, the amount of the 31.30 surcharge under section 256.9657, subdivision 1, shall be 31.31 included in the plant operations and maintenance operating cost 31.32 category. The surcharge shall be an allowable cost for the 31.33 purpose of establishing the payment rate. 31.34(b) [CARE-RELATED OPERATING COST LIMITS.] For the rate31.35year beginning July 1, 1988, the commissioner shall increase the31.36care-related operating cost limits established in Minnesota32.1Rules, part 9549.0055, subpart 2, items A and B, to 125 percent32.2of the median of the array of the allowable historical case mix32.3operating cost standardized per diems and the allowable32.4historical other care-related operating cost per diems and index32.5those limits as in Minnesota Rules, part 9549.0056, subparts 132.6and 2. The limits must be established in accordance with32.7subdivision 2b, paragraph (d).For rate years beginning on or 32.8 after July 1, 1989, the adjusted care-related limits must be 32.9 indexed as in Minnesota Rules, part 9549.0056, subparts 1 and 2. 32.10(c)(b) [SALARY ADJUSTMENT PER DIEM EFFECTIVE JULY 1, 1999 32.11 AND JULY 1, 2000.] Effective July 1,19981999,to June 30,32.122000,the commissioner shall make available the salary 32.13 adjustment per diem calculated in clause (1) or (2) to the total 32.14 operating cost payment rate of each nursing facility reimbursed 32.15 under this sectionor section 256B.434. For July 1, 1999, 32.16 nursing facilities with rates set according to section 256B.434 32.17 shall not receive increases according to this paragraph but 32.18 shall receive inflation increases according to section 256B.434. 32.19 Effective July 1, 2000, the commissioner shall make available an 32.20 additional salary adjustment per diem as calculated in clause 32.21 (1) or (2) to the total operating cost payment rate of each 32.22 nursing facility reimbursed under this section or section 32.23 256B.435. The salary adjustment per diem for each nursing 32.24 facility must be determined as follows: 32.25 (1) For each nursing facility that reports salaries for 32.26 registered nurses, licensed practical nurses, and aides, 32.27 orderlies and attendants separately, the commissioner shall 32.28 determine the salary adjustment per diem by multiplying the 32.29 total salaries, payroll taxes, and fringe benefits allowed in 32.30 each operating cost category, except management fees and 32.31 administrator and central office salaries and the related 32.32 payroll taxes and fringe benefits, by 3.0 percent and then 32.33 dividing the resulting amount by the nursing facility's actual 32.34 resident days. 32.35 (2) For each nursing facility that does not report salaries 32.36 for registered nurses, licensed practical nurses, aides, 33.1 orderlies, and attendants separately, the salary adjustment per 33.2 diem is the weighted average salary adjustment per diem increase 33.3 determined under clause (1). 33.4 (3) A nursing facility may apply for the salary adjustment 33.5 per diem calculated under clauses (1) and (2). The application 33.6 must be made to the commissioner and contain a plan by which the 33.7 nursing facility will distribute the salary adjustment to 33.8 employees of the nursing facility. In order to apply for a July 33.9 1, 2000, salary adjustment, a nursing facility reimbursed under 33.10 section 256B.434, must report the information required by clause 33.11 (1) or (2) in the application, in the manner specified by the 33.12 commissioner. For nursing facilities in which the employees are 33.13 represented by an exclusive bargaining representative, an 33.14 agreement negotiated and agreed to by the employer and the 33.15 exclusive bargaining representative, after July 1, 1998,may 33.16 constitute the plan for the salary distribution. The 33.17 commissioner shall review the plan to ensure that the salary 33.18 adjustment per diem is used solely to increase the compensation 33.19 of nursing home facility employees. To be eligible, a facility 33.20 must submit its plan for the salary distribution by December 31, 33.2119981999. A facility may amend its plan for the second rate 33.22 year by submitting a revised plan by December 31, 2000. If a 33.23 facility's plan for salary distribution is effective for its 33.24 employees after July 1, 1998of the year that the funds are 33.25 available, the salary adjustment cost per diem shall be 33.26 effective the same date as its plan. 33.27 (4) A copy of the approved distribution plan must be made 33.28 available to all employees. This must be done by giving each 33.29 employee a copy or by posting it in an area of the nursing 33.30 facility to which all employees have access. If an employee 33.31 does not receive the salary adjustment described in the 33.32 facility's approved plan and is unable to resolve the problem 33.33 with the facility's management, the employee may contact the 33.34 employee's union representative. If the employee is not covered 33.35 by a collective bargaining agreement, the employee may contact 33.36 the department of human services at a telephone number provided 34.1 by the commissioner and included in the approved plan. 34.2 (5) Additional costs incurred by nursing facilities as a 34.3 result of this salary adjustment are not allowable costs for 34.4 purposes of the September 30,19981999, cost report. 34.5(d) [NEW BASE YEAR.] The commissioner shall establish new34.6base years for both the reporting year ending September 30,34.71989, and the reporting year ending September 30, 1990. In34.8establishing new base years, the commissioner must take into34.9account:34.10(1) statutory changes made in geographic groups;34.11(2) redefinitions of cost categories; and34.12(3) reclassification, pass-through, or exemption of certain34.13costs such as Public Employee Retirement Act contributions.34.14(e)(c) [NEW BASE YEAR.] The commissioner shall establish 34.15 a new base year for the reporting years ending September 30, 34.16 1991, and September 30, 1992. In establishing a new base year, 34.17 the commissioner must take into account: 34.18 (1) statutory changes made in geographic groups; 34.19 (2) redefinitions of cost categories; and 34.20 (3) reclassification, pass-through, or exemption of certain 34.21 costs. 34.22 Sec. 7. Minnesota Statutes 1998, section 256B.431, 34.23 subdivision 2r, is amended to read: 34.24 Subd. 2r. [PAYMENT RESTRICTIONS ON LEAVE DAYS.]Effective34.25July 1, 1993,The commissioner shall limit payment for leave 34.26 days in a nursing facility to 79 percent of that nursing 34.27 facility's total payment rate for the involved resident. 34.28 Sec. 8. Minnesota Statutes 1998, section 256B.431, 34.29 subdivision 3a, is amended to read: 34.30 Subd. 3a. [PROPERTY-RELATED COSTSAFTER JULY 1, 1985.](a)34.31For rate years beginning on or after July 1, 1985, the34.32commissioner, by permanent rule, shall reimburse nursing34.33facility providers that are vendors in the medical assistance34.34program for the rental use of real estate and depreciable34.35equipment. "Real estate" means land improvements, buildings,34.36and attached fixtures used directly for resident care.35.1"Depreciable equipment" means the standard movable resident care35.2equipment and support service equipment generally used in35.3long-term care facilities.35.4(b) In developing the method for determining payment rates35.5for the rental use of nursing facilities, the commissioner shall35.6consider factors designed to:35.7(1) simplify the administrative procedures for determining35.8payment rates for property-related costs;35.9(2) minimize discretionary or appealable decisions;35.10(3) eliminate any incentives to sell nursing facilities;35.11(4) recognize legitimate costs of preserving and replacing35.12property;35.13(5) recognize the existing costs of outstanding35.14indebtedness allowable under the statutes and rules in effect on35.15May 1, 1983;35.16(6) address the current value of, if used directly for35.17patient care, land improvements, buildings, attached fixtures,35.18and equipment;35.19(7) establish an investment per bed limitation;35.20(8) reward efficient management of capital assets;35.21(9) provide equitable treatment of facilities;35.22(10) consider a variable rate; and35.23(11) phase-in implementation of the rental reimbursement35.24method.35.25(c) No later than January 1, 1984, the commissioner shall35.26report to the legislature on any further action necessary or35.27desirable in order to implement the purposes and provisions of35.28this subdivision.35.29(d)(a) For rate years beginning on or after July 1, 1987, 35.30 a nursing facility which has reduced licensed bed capacity after 35.31 January 1, 1986, shall be allowed to: 35.32 (1) aggregate the applicable investment per bed limits 35.33 based on the number of beds licensed prior to the reduction; and 35.34 (2) establish capacity days for each rate year following 35.35 the licensure reduction based on the number of beds licensed on 35.36 the previous April 1 if the commissioner is notified of the 36.1 change by April 4. The notification must include a copy of the 36.2 delicensure request that has been submitted to the commissioner 36.3 of health. 36.4(e) Until the rental reimbursement method is fully phased36.5in, a nursing facility whose final property-related payment rate36.6is the rental rate shall continue to have its property-related36.7payment rates established based on the rental reimbursement36.8method.36.9(f)(b) For rate years beginning on or after July 1, 1989, 36.10 the interest expense that results from a refinancing of a 36.11 nursing facility's demand call loan, when the loan that must be 36.12 refinanced was incurred before May 22, 1983, is an allowable 36.13 interest expense if: 36.14 (1) the demand call loan or any part of it was in the form 36.15 of a loan that was callable at the demand of the lender; 36.16 (2) the demand call loan or any part of it was called by 36.17 the lender through no fault of the nursing facility; 36.18 (3) the demand call loan or any part of it was made by a 36.19 government agency operating under a statutory or regulatory loan 36.20 program; 36.21 (4) the refinanced debt does not exceed the sum of the 36.22 allowable remaining balance of the demand call loan at the time 36.23 of payment on the demand call loan and refinancing costs; 36.24 (5) the term of the refinanced debt does not exceed the 36.25 remaining term of the demand call loan, had the debt not been 36.26 subject to an on-call payment demand; and 36.27 (6) the refinanced debt is not a debt between related 36.28 organizations as defined in Minnesota Rules, part 9549.0020, 36.29 subpart 38. 36.30 Sec. 9. Minnesota Statutes 1998, section 256B.431, 36.31 subdivision 3f, is amended to read: 36.32 Subd. 3f. [PROPERTY COSTS AFTER JULY 1, 1988.] (a) 36.33 [INVESTMENT PER BED LIMIT.] For the rate year beginning July 1, 36.34 1988, the replacement-cost-new per bed limit must be $32,571 per 36.35 licensed bed in multiple bedrooms and $48,857 per licensed bed 36.36 in a single bedroom. For the rate year beginning July 1, 1989, 37.1 the replacement-cost-new per bed limit for a single bedroom must 37.2 be $49,907 adjusted according to Minnesota Rules, part 37.3 9549.0060, subpart 4, item A, subitem (1). Beginning January 1, 37.4 1990, the replacement-cost-new per bed limits must be adjusted 37.5 annually as specified in Minnesota Rules, part 9549.0060, 37.6 subpart 4, item A, subitem (1). Beginning January 1, 1991, the 37.7 replacement-cost-new per bed limits will be adjusted annually as 37.8 specified in Minnesota Rules, part 9549.0060, subpart 4, item A, 37.9 subitem (1), except that the index utilized will be the Bureau 37.10 of the Census: Composite fixed-weighted price index as 37.11 published in the C30 Report, Value of New Construction Put in 37.12 Place. 37.13 (b) [RENTAL FACTOR.] For the rate year beginning July 1, 37.14 1988, the commissioner shall increase the rental factor as 37.15 established in Minnesota Rules, part 9549.0060, subpart 8, item 37.16 A, by 6.2 percent rounded to the nearest 100th percent for the 37.17 purpose of reimbursing nursing facilities for soft costs and 37.18 entrepreneurial profits not included in the cost valuation 37.19 services used by the state's contracted appraisers. For rate 37.20 years beginning on or after July 1, 1989, the rental factor is 37.21 the amount determined under this paragraph for the rate year 37.22 beginning July 1, 1988. 37.23 (c) [OCCUPANCY FACTOR.] For rate years beginning on or 37.24 after July 1, 1988, in order to determine property-related 37.25 payment rates under Minnesota Rules, part 9549.0060, for all 37.26 nursing facilities except those whose average length of stay in 37.27 a skilled level of care within a nursing facility is 180 days or 37.28 less, the commissioner shall use 95 percent of capacity days. 37.29 For a nursing facility whose average length of stay in a skilled 37.30 level of care within a nursing facility is 180 days or less, the 37.31 commissioner shall use the greater of resident days or 80 37.32 percent of capacity days but in no event shall the divisor 37.33 exceed 95 percent of capacity days. 37.34 (d) [EQUIPMENT ALLOWANCE.] For rate years beginning on July 37.35 1, 1988, and July 1, 1989, the commissioner shall add ten cents 37.36 per resident per day to each nursing facility's property-related 38.1 payment rate. The ten-cent property-related payment rate 38.2 increase is not cumulative from rate year to rate year. For the 38.3 rate year beginning July 1, 1990, the commissioner shall 38.4 increase each nursing facility's equipment allowance as 38.5 established in Minnesota Rules, part 9549.0060, subpart 10, by 38.6 ten cents per resident per day. For rate years beginning on or 38.7 after July 1, 1991, the adjusted equipment allowance must be 38.8 adjusted annually for inflation as in Minnesota Rules, part 38.9 9549.0060, subpart 10, item E. For the rate period beginning 38.10 October 1, 1992, the equipment allowance for each nursing 38.11 facility shall be increased by 28 percent. For rate years 38.12 beginning after June 30, 1993, the allowance must be adjusted 38.13 annually for inflation. 38.14 (e)[POST CHAPTER 199 RELATED-ORGANIZATION DEBTS AND38.15INTEREST EXPENSE.] For rate years beginning on or after July 1,38.161990, Minnesota Rules, part 9549.0060, subpart 5, item E, shall38.17not apply to outstanding related organization debt incurred38.18prior to May 23, 1983, provided that the debt was an allowable38.19debt under Minnesota Rules, parts 9510.0010 to 9510.0480, the38.20debt is subject to repayment through annual principal payments,38.21and the nursing facility demonstrates to the commissioner's38.22satisfaction that the interest rate on the debt was less than38.23market interest rates for similar arms-length transactions at38.24the time the debt was incurred. If the debt was incurred due to38.25a sale between family members, the nursing facility must also38.26demonstrate that the seller no longer participates in the38.27management or operation of the nursing facility. Debts meeting38.28the conditions of this paragraph are subject to all other38.29provisions of Minnesota Rules, parts 9549.0010 to 9549.0080.38.30(f)[BUILDING CAPITAL ALLOWANCE FOR NURSING FACILITIES WITH 38.31 OPERATING LEASES.] For rate years beginning on or after July 1, 38.32 1990, a nursing facility with operating lease costs incurred for 38.33 the nursing facility's buildings shall receive its building 38.34 capital allowance computed in accordance with Minnesota Rules, 38.35 part 9549.0060, subpart 8. If an operating lease provides that 38.36 the lessee's rent is adjusted to recognize improvements made by 39.1 the lessor and related debt, the costs for capital improvements 39.2 and related debt shall be allowed in the computation of the 39.3 lessee's building capital allowance, provided that reimbursement 39.4 for these costs under an operating lease shall not exceed the 39.5 rate otherwise paid. 39.6 Sec. 10. Minnesota Statutes 1998, section 256B.431, 39.7 subdivision 10, is amended to read: 39.8 Subd. 10. [PROPERTY RATE ADJUSTMENTS AND CONSTRUCTION 39.9 PROJECTS.] A nursing facility's request for a property-related 39.10 payment rate adjustment and the related supporting documentation 39.11 of project construction cost information must be submitted to 39.12 the commissioner within 60 days after the construction project's 39.13 completion date to be considered eligible for a property-related 39.14 payment rate adjustment. Construction projects with completion 39.15 dates within one year of the completion date associated with the 39.16 property rate adjustment request and phased projects with 39.17 project completion dates within three years of the last phase of 39.18 the phased project must be aggregated for purposes of the 39.19 minimum thresholds in subdivisions 16 and 17, and the maximum 39.20 threshold in section 144A.071, subdivision 2. "Construction 39.21 project," and "project construction costs,"and "phased project"39.22 have the meanings given them in MinnesotaRules, part 4655.111039.23(Emergency)Statutes, section 144A.071, subdivision 1a. 39.24 Sec. 11. Minnesota Statutes 1998, section 256B.431, 39.25 subdivision 11, is amended to read: 39.26 Subd. 11. [SPECIAL PROPERTY RATE SETTING PROCEDURES FOR 39.27 CERTAIN NURSING FACILITIES.](a) Notwithstanding Minnesota39.28Rules, part 9549.0060, subpart 13, item H, to the contrary, for39.29the rate year beginning July 1, 1990, a nursing facility leased39.30prior to January 1, 1986, and currently subject to adverse39.31licensure action under section 144A.04, subdivision 4, paragraph39.32(a), or section 144A.11, subdivision 2, and whose ownership39.33changes prior to July 1, 1990, shall be allowed a39.34property-related payment equal to the lesser of its current39.35lease obligation divided by its capacity days as determined in39.36Minnesota Rules, part 9549.0060, subpart 11, as modified by40.1subdivision 3f, paragraph (c), or the frozen property-related40.2payment rate in effect for the rate year beginning July 1,40.31989. For rate years beginning on or after July 1, 1991, the40.4property-related payment rate shall be its rental rate computed40.5using the previous owner's allowable principal and interest40.6expense as allowed by the department prior to that prior owner's40.7sale and lease-back transaction of December 1985.40.8(b)Notwithstanding other provisions of applicable law, a 40.9 nursing facility licensed for 122 beds on January 1, 1998, and 40.10 located in Columbia Heights shall have its property-related 40.11 payment rate set under this subdivision. The commissioner shall 40.12 make a rate adjustment by adding $2.41 to the facility's July 1, 40.13 1997, property-related payment rate. The adjusted 40.14 property-related payment rate shall be effective for rate years 40.15 beginning on or after July 1, 1998. The adjustment in this 40.16 paragraph shall remain in effect so long as the facility's rates 40.17 are set under this section. If the facility participates in the 40.18 alternative payment system under section 256B.434, the 40.19 adjustment in this paragraph shall be included in the facility's 40.20 contract payment rate. If historical rates or property costs 40.21 recognized under this section become the basis for future 40.22 medical assistance payments to the facility under a managed 40.23 care, capitation, or other alternative payment system, the 40.24 adjustment in this paragraph shall be included in the 40.25 computation of the facility's payments. 40.26 Sec. 12. Minnesota Statutes 1998, section 256B.431, 40.27 subdivision 12, is amended to read: 40.28 Subd. 12. [INTERIM PROPERTY-RELATED PAYMENT RATES.] For 40.29 the rate period July 1, 1991, to June 30, 1993, the commissioner 40.30 shall continue the property-related payment rate in effect on 40.31 June 30, 1991, for each nursing facility, except as provided in 40.32 section 256B.431, subdivision 3i, paragraphs (f) and (g), and 40.33 subdivision 11, except that:. 40.34(1) A chain organization consisting of 28 nursing40.35facilities which has a majority of owners beyond the retirement40.36age of 62 and that has a change in ownership or reorganization41.1of provider entity between July 1, 1991, and June 30, 1993, or41.2until the property reimbursement system is changed, shall41.3receive the property-related payment rate in effect at the time41.4of the sale or reorganization. This exception is not effective41.5until the commissioner has received approval of its state plan41.6from the federal government; and41.7(2) If the property-related payment rate in effect on June41.830, 1991, is later adjusted by the commissioner, the41.9property-related payment rate for the rate period July 1, 1991,41.10to July 1, 1993, shall also be adjusted correspondingly.41.11 Sec. 13. Minnesota Statutes 1998, section 256B.431, 41.12 subdivision 13, is amended to read: 41.13 Subd. 13. [HOLD-HARMLESS PROPERTY-RELATED RATES.] (a) 41.14 Terms used in subdivisions 13 to 21 shall be as defined in 41.15 Minnesota Rules, parts 9549.0010 to 9549.0080, and this section. 41.16 (b) Except as provided in this subdivision, for rate 41.17 periods beginning on October 1, 1992, and for rate years 41.18 beginning after June 30, 1993, the property-related rate for a 41.19 nursing facility shall be the greater of $4 or the 41.20 property-related payment rate in effect on September 30, 1992. 41.21 In addition, the incremental increase in the nursing facility's 41.22 rental rate will be determined under Minnesota Rules, parts 41.23 9549.0010 to 9549.0080, and this section. 41.24 (c) Notwithstanding Minnesota Rules, part 9549.0060, 41.25 subpart 13, item F, a nursing facility that has a sale permitted 41.26 under subdivision 14 after June 30, 1992, shall receive the 41.27 property-related payment rate in effect at the time of the sale 41.28 or reorganization. For rate periods beginning after October 1, 41.29 1992, and for rate years beginning after June 30, 1993, a 41.30 nursing facility shall receive, in addition to its 41.31 property-related payment rate in effect at the time of the sale, 41.32 the incremental increase allowed under subdivision 14. 41.33(d) For rate years beginning after June 30, 1993, the41.34property-related rate for a nursing facility licensed after July41.351, 1989, after relocating its beds from a separate nursing home41.36to a building formerly used as a hospital and sold during the42.1cost reporting year ending September 30, 1991, shall be its42.2property-related rate prior to the sale in addition to the42.3incremental increases provided under this section effective on42.4October 1, 1992, of 29 cents per day, and any incremental42.5increases after October 1, 1992, calculated by using its rental42.6rate under Minnesota Rules, parts 9549.0010 to 9549.0080, and42.7this section, recognizing the current appraised value of the42.8facility at the new location, and including as allowable debt42.9otherwise allowable debt incurred to remodel the facility in the42.10new location prior to the relocation of beds.42.11 Sec. 14. Minnesota Statutes 1998, section 256B.431, 42.12 subdivision 15, is amended to read: 42.13 Subd. 15. [CAPITAL REPAIR AND REPLACEMENT COST REPORTING 42.14 AND RATE CALCULATION.] For rate years beginning after June 30, 42.15 1993, a nursing facility's capital repair and replacement 42.16 payment rate shall be established annually as provided in 42.17 paragraphs (a) to (e). For rate years beginning on or after 42.18 July 1, 2000, the payment rate determined in this subdivision 42.19 shall be considered a component of the operating cost payment 42.20 rate. 42.21 (a) Notwithstanding Minnesota Rules, part 9549.0060, 42.22 subpart 12, the costs of any of the following items not included 42.23 in the equity incentive computations under subdivision 16 or 42.24 reported as a capital asset addition under subdivision 18, 42.25 paragraph (b), including cash payment for equity investment and 42.26 principal and interest expense for debt financing, must be 42.27 reported in the capital repair and replacement cost category: 42.28 (1) wall coverings; 42.29 (2) paint; 42.30 (3) floor coverings; 42.31 (4) window coverings; 42.32 (5) roof repair; and 42.33 (6) window repair or replacement. 42.34 (b) Notwithstanding Minnesota Rules, part 9549.0060, 42.35 subpart 12, the repair or replacement of a capital asset not 42.36 included in the equity incentive computations under subdivision 43.1 16 or reported as a capital asset addition under subdivision 18, 43.2 paragraph (b), must be reported under this subdivision when the 43.3 cost of the item exceeds $500, or in the plant operations and 43.4 maintenance cost category when the cost of the item is equal to 43.5 or less than $500. 43.6 (c) To compute the capital repair and replacement payment 43.7 rate, the allowable annual repair and replacement costs for the 43.8 reporting year must be divided by actual resident days for the 43.9 reporting year. The annual allowable capital repair and 43.10 replacement costs shall not exceed $150 per licensed bed. The 43.11 excess of the allowed capital repair and replacement costs over 43.12 the capital repair and replacement limit shall be a cost 43.13 carryover to succeeding cost reporting periods, except that sale 43.14 of a facility, under subdivision 14, shall terminate the 43.15 carryover of all costs except those incurred in the most recent 43.16 cost reporting year. The termination of the carryover shall 43.17 have effect on the capital repair and replacement rate on the 43.18 same date as provided in subdivision 14, paragraph (f), for the 43.19 sale. For rate years beginning after June 30, 1994, the capital 43.20 repair and replacement limit shall be subject to the index 43.21 provided in subdivision 3f, paragraph (a). For purposes of this 43.22 subdivision, the number of licensed beds shall be the number 43.23 used to calculate the nursing facility's capacity days. The 43.24 capital repair and replacement rate must be added to the nursing 43.25 facility's total payment rate. 43.26 (d) Capital repair and replacement costs under this 43.27 subdivision shall not be counted as either care-related or other 43.28 operating costs, nor subject to care-related or other operating 43.29 limits. 43.30 (e) If costs otherwise allowable under this subdivision are 43.31 incurred as the result of a project approved under the 43.32 moratorium exception process in section 144A.073, or in 43.33 connection with an addition to or replacement of buildings, 43.34 attached fixtures, or land improvements for which the total 43.35 historical cost of these assets exceeds the lesser of $150,000 43.36 or ten percent of the nursing facility's appraised value, these 44.1 costs must be claimed under subdivision 16 or 17, as appropriate. 44.2 Sec. 15. Minnesota Statutes 1998, section 256B.431, 44.3 subdivision 16, is amended to read: 44.4 Subd. 16. [MAJOR ADDITIONS AND REPLACEMENTS; EQUITY 44.5 INCENTIVE.] For rate years beginning after June 30, 1993, if a 44.6 nursing facility acquires capital assets in connection with a 44.7 project approved under the moratorium exception process in 44.8 section 144A.073 or in connection with an addition to or 44.9 replacement of buildings, attached fixtures, or land 44.10 improvements for which the total historical cost of those 44.11 capital asset additions exceeds the lesser of $150,000 or ten 44.12 percent of the most recent appraised value, the nursing facility 44.13 shall be eligible for an equity incentive payment rate as in 44.14 paragraphs (a) to (d). This computation is separate from the 44.15 determination of the nursing facility's rental rate. An equity 44.16 incentive payment rate as computed under this subdivision is 44.17 limited to one in a 12-month period. For rate years beginning 44.18 on or after July 1, 2000, the payment rate determined in 44.19 paragraphs (a) to (c) shall be considered a component of the 44.20 operating cost payment rate. 44.21 (a) An eligible nursing facility shall receive an equity 44.22 incentive payment rate equal to the allowable historical cost of 44.23 the capital asset acquired, minus the allowable debt directly 44.24 identified to that capital asset, multiplied by the equity 44.25 incentive factor as described in paragraphs (b) and (c), and 44.26 divided by the nursing facility's occupancy factor under 44.27 subdivision 3f, paragraph (c). This amount shall be added to 44.28 the nursing facility's total payment rate and shall be effective 44.29 the same day as the incremental increase in paragraph (d) or 44.30 subdivision 17. The allowable historical cost of the capital 44.31 assets and the allowable debt shall be determined as provided in 44.32 Minnesota Rules, parts 9549.0010 to 9549.0080, and this section. 44.33 (b) The equity incentive factor shall be determined under 44.34 clauses (1) to (4): 44.35 (1) divide the initial allowable debt in paragraph (a) by 44.36 the initial historical cost of the capital asset additions 45.1 referred to in paragraph (a), then cube the quotient, 45.2 (2) subtract the amount calculated in clause (1) from the 45.3 number one, 45.4 (3) determine the difference between the rental factor and 45.5 the lesser of two percentage points above the posted yield for 45.6 standard conventional fixed rate mortgages of the Federal Home 45.7 Loan Mortgage Corporation as published in the Wall Street 45.8 Journal and in effect on the first day of the month the debt or 45.9 cost is incurred, or 16 percent, 45.10 (4) multiply the amount calculated in clause (2) by the 45.11 amount calculated in clause (3). 45.12 (c) The equity incentive payment rate shall be limited to 45.13 the term of the allowable debt in paragraph (a), not greater 45.14 than 20 years nor less than ten years. If no debt is incurred 45.15 in acquiring the capital asset, the equity incentive payment 45.16 rate shall be paid for ten years. The sale of a nursing 45.17 facility under subdivision 14 shall terminate application of the 45.18 equity incentive payment rate effective on the date provided in 45.19 subdivision 4, paragraph (f), for the sale. 45.20 (d) A nursing facility with an addition to or a renovation 45.21 of its buildings, attached fixtures, or land improvements 45.22 meeting the criteria in this subdivision and not receiving the 45.23 property-related payment rate adjustment in subdivision 17, 45.24 shall receive the incremental increase in the nursing facility's 45.25 rental rate as determined under Minnesota Rules, parts 9549.0010 45.26 to 9549.0080, and this section. The incremental increase shall 45.27 be added to the nursing facility's property-related payment rate. 45.28 The effective date of this incremental increase shall be the 45.29 first day of the month following the month in which the addition 45.30 or replacement is completed. 45.31 Sec. 16. Minnesota Statutes 1998, section 256B.431, 45.32 subdivision 17, is amended to read: 45.33 Subd. 17. [SPECIAL PROVISIONS FOR MORATORIUM EXCEPTIONS.] 45.34 (a) Notwithstanding Minnesota Rules, part 9549.0060, subpart 3, 45.35 for rate periods beginning on October 1, 1992, and for rate 45.36 years beginning after June 30, 1993, a nursing facility that (1) 46.1 has completed a construction project approved under section 46.2 144A.071, subdivision 4a, clause (m); (2) has completed a 46.3 construction project approved under section 144A.071, 46.4 subdivision 4a, and effective after June 30, 1995; or (3) has 46.5 completed a renovation, replacement, or upgrading project 46.6 approved under the moratorium exception process in section 46.7 144A.073 shall be reimbursed for costs directly identified to 46.8 that project as provided in subdivision 16 and this subdivision. 46.9 (b) Notwithstanding Minnesota Rules, part 9549.0060, 46.10 subparts 5, item A, subitems (1) and (3), and 7, item D, 46.11 allowable interest expense on debt shall include: 46.12 (1) interest expense on debt related to the cost of 46.13 purchasing or replacing depreciable equipment, excluding 46.14 vehicles, not to exceed six percent of the total historical cost 46.15 of the project; and 46.16 (2) interest expense on debt related to financing or 46.17 refinancing costs, including costs related to points, loan 46.18 origination fees, financing charges, legal fees, and title 46.19 searches; and issuance costs including bond discounts, bond 46.20 counsel, underwriter's counsel, corporate counsel, printing, and 46.21 financial forecasts. Allowable debt related to items in this 46.22 clause shall not exceed seven percent of the total historical 46.23 cost of the project. To the extent these costs are financed, 46.24 the straight-line amortization of the costs in this clause is 46.25 not an allowable cost; and 46.26 (3) interest on debt incurred for the establishment of a 46.27 debt reserve fund, net of the interest earned on the debt 46.28 reserve fund. 46.29 (c) Debt incurred for costs under paragraph (b) is not 46.30 subject to Minnesota Rules, part 9549.0060, subpart 5, item A, 46.31 subitem (5) or (6). 46.32 (d) The incremental increase in a nursing facility's rental 46.33 rate, determined under Minnesota Rules, parts 9549.0010 to 46.34 9549.0080, and this section, resulting from the acquisition of 46.35 allowable capital assets, and allowable debt and interest 46.36 expense under this subdivision shall be added to its 47.1 property-related payment rate and shall be effective on the 47.2 first day of the month following the month in which the 47.3 moratorium project was completed. 47.4 (e) Notwithstanding subdivision 3f, paragraph (a), for rate 47.5 periods beginning on October 1, 1992, and for rate years 47.6 beginning after June 30, 1993, the replacement-costs-new per bed 47.7 limit to be used in Minnesota Rules, part 9549.0060, subpart 4, 47.8 item B, for a nursing facility that has completed a renovation, 47.9 replacement, or upgrading project that has been approved under 47.10 the moratorium exception process in section 144A.073, or that 47.11 has completed an addition to or replacement of buildings, 47.12 attached fixtures, or land improvements for which the total 47.13 historical cost exceeds the lesser of $150,000 or ten percent of 47.14 the most recent appraised value, must be $47,500 per licensed 47.15 bed in multiple-bed rooms and $71,250 per licensed bed in a 47.16 single-bed room. These amounts must be adjusted annually as 47.17 specified in subdivision 3f, paragraph (a), beginning January 1, 47.18 1993. 47.19(f) A nursing facility that completes a project identified47.20in this subdivision and, as of April 17, 1992, has not been47.21mailed a rate notice with a special appraisal for a completed47.22project, or completes a project after April 17, 1992, but before47.23September 1, 1992, may elect either to request a special47.24reappraisal with the corresponding adjustment to the47.25property-related payment rate under the laws in effect on June47.2630, 1992, or to submit their capital asset and debt information47.27after that date and obtain the property-related payment rate47.28adjustment under this section, but not both.47.29(g)(f) For purposes of this paragraph, a total replacement 47.30 means the complete replacement of the nursing facility's 47.31 physical plant through the construction of a new physical plant 47.32 or the transfer of the nursing facility's license from one 47.33 physical plant location to another. For total replacement 47.34 projects completed on or after July 1, 1992, the commissioner 47.35 shall compute the incremental change in the nursing facility's 47.36 rental per diem, for rate years beginning on or after July 1, 48.1 1995, by replacing its appraised value, including the historical 48.2 capital asset costs, and the capital debt and interest costs 48.3 with the new nursing facility's allowable capital asset costs 48.4 and the related allowable capital debt and interest costs. If 48.5 the new nursing facility has decreased its licensed capacity, 48.6 the aggregate investment per bed limit in subdivision 3a, 48.7 paragraph (d), shall apply. If the new nursing facility has 48.8 retained a portion of the original physical plant for nursing 48.9 facility usage, then a portion of the appraised value prior to 48.10 the replacement must be retained and included in the calculation 48.11 of the incremental change in the nursing facility's rental per 48.12 diem. For purposes of this part, the original nursing facility 48.13 means the nursing facility prior to the total replacement 48.14 project. The portion of the appraised value to be retained 48.15 shall be calculated according to clauses (1) to (3): 48.16 (1) The numerator of the allocation ratio shall be the 48.17 square footage of the area in the original physical plant which 48.18 is being retained for nursing facility usage. 48.19 (2) The denominator of the allocation ratio shall be the 48.20 total square footage of the original nursing facility physical 48.21 plant. 48.22 (3) Each component of the nursing facility's allowable 48.23 appraised value prior to the total replacement project shall be 48.24 multiplied by the allocation ratio developed by dividing clause 48.25 (1) by clause (2). 48.26 In the case of either type of total replacement as 48.27 authorized under section 144A.071 or 144A.073, the provisions of 48.28 this subdivision shall also apply. For purposes of the 48.29 moratorium exception authorized under section 144A.071, 48.30 subdivision 4a, paragraph (s), if the total replacement involves 48.31 the renovation and use of an existing health care facility 48.32 physical plant, the new allowable capital asset costs and 48.33 related debt and interest costs shall include first the 48.34 allowable capital asset costs and related debt and interest 48.35 costs of the renovation, to which shall be added the allowable 48.36 capital asset costs of the existing physical plant prior to the 49.1 renovation, and if reported by the facility, the related 49.2 allowable capital debt and interest costs. 49.3 Sec. 17. Minnesota Statutes 1998, section 256B.431, 49.4 subdivision 18, is amended to read: 49.5 Subd. 18. [APPRAISALS;UPDATING APPRAISALS, ADDITIONS, AND 49.6 REPLACEMENTS.](a) Notwithstanding Minnesota Rules, part49.79549.0060, subparts 1 to 3, the appraised value, routine49.8updating of the appraised value, and special reappraisals are49.9subject to this subdivision.49.10(1) For rate years beginning after June 30, 1993, the49.11commissioner shall permit a nursing facility to appeal its49.12appraisal. Any reappraisals conducted in connection with that49.13appeal must utilize the comparative-unit method as described in49.14the Marshall Valuation Service published by Marshall-Swift in49.15establishing the nursing facility's depreciated replacement cost.49.16Nursing facilities electing to appeal their appraised value49.17shall file written notice of appeal with the commissioner of49.18human services before December 30, 1992. The cost of the49.19reappraisal, if any, shall be considered an allowable cost under49.20Minnesota Rules, parts 9549.0040, subpart 9, and 9549.0061.49.21(2) The redetermination of a nursing facility's appraised49.22value under this paragraph shall have no impact on the rental49.23payment rate determined under subdivision 13 but shall only be49.24used for calculating the nursing facility's rental rate under49.25Minnesota Rules, parts 9549.0010 to 9549.0080, and this section49.26for rate years beginning after June 30, 1993.49.27(3) For all rate years after June 30, 1993, the49.28commissioner shall no longer conduct any appraisals under49.29Minnesota Rules, part 9549.0060, for the purpose of determining49.30property-related payment rates.49.31(b)Notwithstanding Minnesota Rules, part 9549.0060, 49.32 subpart 2, for rate years beginning after June 30, 1993, the 49.33 commissioner shall routinely update the appraised value of each 49.34 nursing facility by adding the cost of capital asset 49.35 acquisitions to its allowable appraised value. 49.36 The commissioner shall also annually index each nursing 50.1 facility's allowable appraised value by the inflation index 50.2 referenced in subdivision 3f, paragraph (a), for the purpose of 50.3 computing the nursing facility's annual rental rate. In 50.4 annually adjusting the nursing facility's appraised value, the 50.5 commissioner must not include the historical cost of capital 50.6 assets acquired during the reporting year in the nursing 50.7 facility's appraised value. 50.8 In addition, the nursing facility's appraised value must be 50.9 reduced by the historical cost of capital asset disposals or 50.10 applicable credits such as public grants and insurance 50.11 proceeds. Capital asset additions and disposals must be 50.12 reported on the nursing facility's annual cost report in the 50.13 reporting year of acquisition or disposal. The incremental 50.14 increase in the nursing facility's rental rate resulting from 50.15 this annual adjustment as determined under Minnesota Rules, 50.16 parts 9549.0010 to 9549.0080, and this section shall be added to 50.17 the nursing facility's property-related payment rate for the 50.18 rate year following the reporting year. 50.19 Sec. 18. Minnesota Statutes 1998, section 256B.431, 50.20 subdivision 22, is amended to read: 50.21 Subd. 22. [CHANGES TO NURSING FACILITY REIMBURSEMENT.] The 50.22 nursing facility reimbursement changes in paragraphs (a) to (e) 50.23 apply to Minnesota Rules, parts 9549.0010 to 9549.0080, and this 50.24 section, and are effective for rate years beginning on or after 50.25 July 1, 1993, unless otherwise indicated. 50.26 (a) In addition to the approved pension or profit sharing 50.27 plans allowed by the reimbursement rule, the commissioner shall 50.28 allow those plans specified in Internal Revenue Code, sections 50.29 403(b) and 408(k). 50.30 (b) The commissioner shall allow as workers' compensation 50.31 insurance costs under section 256B.421, subdivision 14, the 50.32 costs of workers' compensation coverage obtained under the 50.33 following conditions: 50.34 (1) a plan approved by the commissioner of commerce as a 50.35 Minnesota group or individual self-insurance plan as provided in 50.36 section 79A.03; 51.1 (2) a plan in which: 51.2 (i) the nursing facility, directly or indirectly, purchases 51.3 workers' compensation coverage in compliance with section 51.4 176.181, subdivision 2, from an authorized insurance carrier; 51.5 (ii) a related organization to the nursing facility 51.6 reinsures the workers' compensation coverage purchased, directly 51.7 or indirectly, by the nursing facility; and 51.8 (iii) all of the conditions in clause (4) are met; 51.9 (3) a plan in which: 51.10 (i) the nursing facility, directly or indirectly, purchases 51.11 workers' compensation coverage in compliance with section 51.12 176.181, subdivision 2, from an authorized insurance carrier; 51.13 (ii) the insurance premium is calculated retrospectively, 51.14 including a maximum premium limit, and paid using the paid loss 51.15 retro method; and 51.16 (iii) all of the conditions in clause (4) are met; 51.17 (4) additional conditions are: 51.18 (i) the costs of the plan are allowable under the federal 51.19 Medicare program; 51.20 (ii) the reserves for the plan are maintained in an account 51.21 controlled and administered by a person which is not a related 51.22 organization to the nursing facility; 51.23 (iii) the reserves for the plan cannot be used, directly or 51.24 indirectly, as collateral for debts incurred or other 51.25 obligations of the nursing facility or related organizations to 51.26 the nursing facility; 51.27 (iv) if the plan provides workers' compensation coverage 51.28 for non-Minnesota nursing facilities, the plan's cost 51.29 methodology must be consistent among all nursing facilities 51.30 covered by the plan, and if reasonable, is allowed 51.31 notwithstanding any reimbursement laws regarding cost allocation 51.32 to the contrary; 51.33 (v) central, affiliated, corporate, or nursing facility 51.34 costs related to their administration of the plan are costs 51.35 which must remain in the nursing facility's administrative cost 51.36 category and must not be allocated to other cost categories; 52.1 (vi) required security deposits, whether in the form of 52.2 cash, investments, securities, assets, letters of credit, or in 52.3 any other form are not allowable costs for purposes of 52.4 establishing the facilities payment rate; and 52.5 (vii) for the rate year beginning on July 1, 1998, a group 52.6 of nursing facilities related by common ownership that 52.7 self-insures workers' compensation may allocate its directly 52.8 identified costs of self-insuring its Minnesota nursing facility 52.9 workers among those nursing facilities in the group that are 52.10 reimbursed under this section or section 256B.434. The method 52.11 of cost allocation shall be based on the ratio of each nursing 52.12 facility's total allowable salaries and wages to that of the 52.13 nursing facility group's total allowable salaries and wages, 52.14 then similarly allocated within each nursing facility's 52.15 operating cost categories. The costs associated with the 52.16 administration of the group's self-insurance plan must remain 52.17 classified in the nursing facility's administrative cost 52.18 category. A written request of the nursing facility group's 52.19 election to use this alternate method of allocation of 52.20 self-insurance costs must be received by the commissioner no 52.21 later than May 1, 1998, to take effect July 1, 1998, or such 52.22 costs shall continue to be allocated under the existing cost 52.23 allocation methods. Once a nursing facility group elects this 52.24 method of cost allocation for its workers' compensation 52.25 self-insurance costs, it shall remain in effect until such time 52.26 as the group no longer self-insures these costs; 52.27 (5) any costs allowed pursuant to clauses (1) to (3) are 52.28 subject to the following requirements: 52.29 (i) if the nursing facility is sold or otherwise ceases 52.30 operations, the plan's reserves must be subject to an 52.31 actuarially based settle-up after 36 months from the date of 52.32 sale or the date on which operations ceased. The facility's 52.33 medical assistance portion of the total excess plan reserves 52.34 must be paid to the state within 30 days following the date on 52.35 which excess plan reserves are determined; 52.36 (ii) any distribution of excess plan reserves made to or 53.1 withdrawals made by the nursing facility or a related 53.2 organization are applicable credits and must be used to reduce 53.3 the nursing facility's workers' compensation insurance costs in 53.4 the reporting period in which a distribution or withdrawal is 53.5 received; 53.6 (iii) if reimbursement for the plan is sought under the 53.7 federal Medicare program, and is audited pursuant to the 53.8 Medicare program, the nursing facility must provide a copy of 53.9 Medicare's final audit report, including attachments and 53.10 exhibits, to the commissioner within 30 days of receipt by the 53.11 nursing facility or any related organization. The commissioner 53.12 shall implement the audit findings associated with the plan upon 53.13 receipt of Medicare's final audit report. The department's 53.14 authority to implement the audit findings is independent of its 53.15 authority to conduct a field audit. 53.16 (c) In the determination of incremental increases in the 53.17 nursing facility's rental rate as required in subdivisions 14 to 53.18 21, except for a refinancing permitted under subdivision 19, the 53.19 commissioner must adjust the nursing facility's property-related 53.20 payment rate for both incremental increases and decreases in 53.21 recomputations of its rental rate;. 53.22 (d) A nursing facility's administrative cost limitation 53.23 must be modified as follows: 53.24 (1) if the nursing facility's licensed beds exceed 195 53.25 licensed beds, the general and administrative cost category 53.26 limitation shall be 13 percent; 53.27 (2) if the nursing facility's licensed beds are more than 53.28 150 licensed beds, but less than 196 licensed beds, the general 53.29 and administrative cost category limitation shall be 14 percent; 53.30 or 53.31 (3) if the nursing facility's licensed beds is less than 53.32 151 licensed beds, the general and administrative cost category 53.33 limitation shall remain at 15 percent. 53.34 (e)The care related operating rate shall be increased by53.35eight cents to reimburse facilities for unfunded federal53.36mandates, including costs related to hepatitis B vaccinations.54.1(f)For the rate year beginning on July 1, 1998, a group of 54.2 nursing facilities related by common ownership that self-insures 54.3 group health, dental, or life insurance may allocate its 54.4 directly identified costs of self-insuring its Minnesota nursing 54.5 facility workers among those nursing facilities in the group 54.6 that are reimbursed under this section or section 256B.434. The 54.7 method of cost allocation shall be based on the ratio of each 54.8 nursing facility's total allowable salaries and wages to that of 54.9 the nursing facility group's total allowable salaries and wages, 54.10 then similarly allocated within each nursing facility's 54.11 operating cost categories. The costs associated with the 54.12 administration of the group's self-insurance plan must remain 54.13 classified in the nursing facility's administrative cost 54.14 category. A written request of the nursing facility group's 54.15 election to use this alternate method of allocation of 54.16 self-insurance costs must be received by the commissioner no 54.17 later than May 1, 1998, to take effect July 1, 1998, or those 54.18 self-insurance costs shall continue to be allocated under the 54.19 existing cost allocation methods. Once a nursing facility group 54.20 elects this method of cost allocation for its group health, 54.21 dental, or life insurance self-insurance costs, it shall remain 54.22 in effect until such time as the group no longer self-insures 54.23 these costs. 54.24 Sec. 19. Minnesota Statutes 1998, section 256B.431, 54.25 subdivision 26, is amended to read: 54.26 Subd. 26. [CHANGES TO NURSING FACILITY REIMBURSEMENT 54.27 BEGINNING JULY 1, 1997.] The nursing facility reimbursement 54.28 changes in paragraphs (a) to (f) shall apply in the sequence 54.29 specified in Minnesota Rules, parts 9549.0010 to 9549.0080, and 54.30 this section, beginning July 1, 1997. 54.31 (a) For rate years beginning on or after July 1, 1997, the 54.32 commissioner shall limit a nursing facility's allowable 54.33 operating per diem for each case mix category for each rate year. 54.34 The commissioner shall group nursing facilities into two groups, 54.35 freestanding and nonfreestanding, within each geographic group, 54.36 using their operating cost per diem for the case mix A 55.1 classification. A nonfreestanding nursing facility is a nursing 55.2 facility whose other operating cost per diem is subject to the 55.3 hospital attached, short length of stay, or the rule 80 limits. 55.4 All other nursing facilities shall be considered freestanding 55.5 nursing facilities. The commissioner shall then array all 55.6 nursing facilities in each grouping by their allowable case mix 55.7 A operating cost per diem. In calculating a nursing facility's 55.8 operating cost per diem for this purpose, the commissioner shall 55.9 exclude the raw food cost per diem related to providing special 55.10 diets that are based on religious beliefs, as determined in 55.11 subdivision 2b, paragraph (h). For those nursing facilities in 55.12 each grouping whose case mix A operating cost per diem: 55.13 (1) is at or below the median of the array, the 55.14 commissioner shall limit the nursing facility's allowable 55.15 operating cost per diem for each case mix category to the lesser 55.16 of the prior reporting year's allowable operating cost per diem 55.17 as specified in Laws 1996, chapter 451, article 3, section 11, 55.18 paragraph (h), plus the inflation factor as established in 55.19 paragraph (d), clause (2), increased by two percentage points, 55.20 or the current reporting year's corresponding allowable 55.21 operating cost per diem; or 55.22 (2) is above the median of the array, the commissioner 55.23 shall limit the nursing facility's allowable operating cost per 55.24 diem for each case mix category to the lesser of the prior 55.25 reporting year's allowable operating cost per diem as specified 55.26 in Laws 1996, chapter 451, article 3, section 11, paragraph (h), 55.27 plus the inflation factor as established in paragraph (d), 55.28 clause (2), increased by one percentage point, or the current 55.29 reporting year's corresponding allowable operating cost per diem. 55.30 For purposes of paragraph (a), if a nursing facility 55.31 reports on its cost report a reduction in cost due to a refund 55.32 or credit for a rate year beginning on or after July 1, 1998, 55.33 the commissioner shall increase that facility's spend-up limit 55.34 for the rate year following the current rate year by the amount 55.35 of the cost reduction divided by its resident days for the 55.36 reporting year preceding the rate year in which the adjustment 56.1 is to be made. 56.2 (b) For rate years beginning on or after July 1, 1997, the 56.3 commissioner shall limit the allowable operating cost per diem 56.4 for high cost nursing facilities. After application of the 56.5 limits in paragraph (a) to each nursing facility's operating 56.6 cost per diem, the commissioner shall group nursing facilities 56.7 into two groups, freestanding or nonfreestanding, within each 56.8 geographic group. A nonfreestanding nursing facility is a 56.9 nursing facility whose other operating cost per diem are subject 56.10 to hospital attached, short length of stay, or rule 80 limits. 56.11 All other nursing facilities shall be considered freestanding 56.12 nursing facilities. The commissioner shall then array all 56.13 nursing facilities within each grouping by their allowable case 56.14 mix A operating cost per diem. In calculating a nursing 56.15 facility's operating cost per diem for this purpose, the 56.16 commissioner shall exclude the raw food cost per diem related to 56.17 providing special diets that are based on religious beliefs, as 56.18 determined in subdivision 2b, paragraph (h). For those nursing 56.19 facilities in each grouping whose case mix A operating cost per 56.20 diem exceeds 1.0 standard deviation above the median, the 56.21 commissioner shall reduce their allowable operating cost per 56.22 diem by three percent. For those nursing facilities in each 56.23 grouping whose case mix A operating cost per diem exceeds 0.5 56.24 standard deviation above the median but is less than or equal to 56.25 1.0 standard deviation above the median, the commissioner shall 56.26 reduce their allowable operating cost per diem by two percent. 56.27 However, in no case shall a nursing facility's operating cost 56.28 per diem be reduced below its grouping's limit established at 56.29 0.5 standard deviations above the median. 56.30 (c) For rate years beginning on or after July 1, 1997, the 56.31 commissioner shall determine a nursing facility's efficiency 56.32 incentive by first computing the allowable difference, which is 56.33 the lesser of $4.50 or the amount by which the facility's other 56.34 operating cost limit exceeds its nonadjusted other operating 56.35 cost per diem for that rate year. The commissioner shall 56.36 compute the efficiency incentive by: 57.1 (1) subtracting the allowable difference from $4.50 and 57.2 dividing the result by $4.50; 57.3 (2) multiplying 0.20 by the ratio resulting from clause 57.4 (1), and then; 57.5 (3) adding 0.50 to the result from clause (2); and 57.6 (4) multiplying the result from clause (3) times the 57.7 allowable difference. 57.8 The nursing facility's efficiency incentive payment shall 57.9 be the lesser of $2.25 or the product obtained in clause (4). 57.10 (d) For rate years beginning on or after July 1, 1997, the 57.11 forecasted price index for a nursing facility's allowable 57.12 operating cost per diem shall be determined under clauses (1) 57.13 and (2) using the change in the Consumer Price Index-All Items 57.14 (United States city average) (CPI-U) as forecasted by Data 57.15 Resources, Inc. The commissioner shall use the indices as 57.16 forecasted in the fourth quarter of the calendar year preceding 57.17 the rate year, subject tosubdivision 2l, paragraph (c)the 57.18 budget change request procedure in section 256B.435, subdivision 57.19 1. 57.20 (1) The CPI-U forecasted index for allowable operating cost 57.21 per diem shall be based on the 21-month period from the midpoint 57.22 of the nursing facility's reporting year to the midpoint of the 57.23 rate year following the reporting year. 57.24 (2) For rate years beginning on or after July 1, 1997, the 57.25 forecasted index for operating cost limitsreferred to in57.26subdivision 21, paragraph (b),shall be based on the CPI-U for 57.27 the 12-month period between the midpoints of the two reporting 57.28 years preceding the rate year. 57.29 (e) After applying these provisions for the respective rate 57.30 years, the commissioner shall index these allowable operating 57.31 cost per diem by the inflation factor provided for in paragraph 57.32 (d), clause (1), and add the nursing facility's efficiency 57.33 incentive as computed in paragraph (c). 57.34(f) For rate years beginning on or after July 1, 1997, the57.35total operating cost payment rates for a nursing facility shall57.36be the greater of the total operating cost payment rates58.1determined under this section or the total operating cost58.2payment rates in effect on June 30, 1997, subject to rate58.3adjustments due to field audit or rate appeal resolution. This58.4provision shall not apply to subsequent field audit adjustments58.5of the nursing facility's operating cost rates for rate years58.6beginning on or after July 1, 1997.58.7(g) For the rate years beginning on July 1, 1997, July 1,58.81998, and July 1, 1999, a nursing facility licensed for 40 beds58.9effective May 1, 1992, with a subsequent increase of 2058.10Medicare/Medicaid certified beds, effective January 26, 1993, in58.11accordance with an increase in licensure is exempt from58.12paragraphs (a) and (b).58.13(h)(f) For a nursing facility whose construction project 58.14 was authorized according to section 144A.073, subdivision 5, 58.15 paragraph (g), the operating cost payment rates for the third 58.16 location shall be determined based on Minnesota Rules, part 58.17 9549.0057. Paragraphs (a) and (b) shall not apply until the 58.18 second rate year after the settle-up cost report is filed. 58.19 Notwithstanding subdivision 2b, paragraph (g), real estate taxes 58.20 and special assessments payable by the third location, a 58.21 501(c)(3) nonprofit corporation, shall be included in the 58.22 payment rates determined under this subdivision for all 58.23 subsequent rate years. 58.24(i) For the rate year beginning July 1, 1997, the58.25commissioner shall compute the payment rate for a nursing58.26facility licensed for 94 beds on September 30, 1996, that58.27applied in October 1993 for approval of a total replacement58.28under the moratorium exception process in section 144A.073, and58.29completed the approved replacement in June 1995, with other58.30operating cost spend-up limit under paragraph (a), increased by58.31$3.98, and after computing the facility's payment rate according58.32to this section, the commissioner shall make a one-year positive58.33rate adjustment of $3.19 for operating costs related to the58.34newly constructed total replacement, without application of58.35paragraphs (a) and (b). The facility's per diem, before the58.36$3.19 adjustment, shall be used as the prior reporting year's59.1allowable operating cost per diem for payment rate calculation59.2for the rate year beginning July 1, 1998. A facility described59.3in this paragraph is exempt from paragraph (b) for the rate59.4years beginning July 1, 1997, and July 1, 1998.59.5(j) For the purpose of applying the limit stated in59.6paragraph (a), a nursing facility in Kandiyohi county licensed59.7for 86 beds that was granted hospital-attached status on59.8December 1, 1994, shall have the prior year's allowable59.9care-related per diem increased by $3.207 and the prior year's59.10other operating cost per diem increased by $4.777 before adding59.11the inflation in paragraph (d), clause (2), for the rate year59.12beginning on July 1, 1997.59.13(k) For the purpose of applying the limit stated in59.14paragraph (a), a 117 bed nursing facility located in Pine county59.15shall have the prior year's allowable other operating cost per59.16diem increased by $1.50 before adding the inflation in paragraph59.17(d), clause (2), for the rate year beginning on July 1, 1997.59.18(l) For the purpose of applying the limit under paragraph59.19(a), a nursing facility in Hibbing licensed for 192 beds shall59.20have the prior year's allowable other operating cost per diem59.21increased by $2.67 before adding the inflation in paragraph (d),59.22clause (2), for the rate year beginning July 1, 1997.59.23 Sec. 20. Minnesota Statutes 1998, section 256B.431, 59.24 subdivision 27, is amended to read: 59.25 Subd. 27. [CHANGES TO NURSING FACILITY REIMBURSEMENT 59.26 BEGINNING JULY 1, 1998.](a) For the purpose of applying the59.27limit stated in subdivision 26, paragraph (a), a nursing59.28facility in Hennepin county licensed for 181 beds on September59.2930, 1996, shall have the prior year's allowable care-related per59.30diem increased by $1.455 and the prior year's other operating59.31cost per diem increased by $0.439 before adding the inflation in59.32subdivision 26, paragraph (d), clause (2), for the rate year59.33beginning on July 1, 1998.59.34(b) For the purpose of applying the limit stated in59.35subdivision 26, paragraph (a), a nursing facility in Hennepin59.36county licensed for 161 beds on September 30, 1996, shall have60.1the prior year's allowable care-related per diem increased by60.2$1.154 and the prior year's other operating cost per diem60.3increased by $0.256 before adding the inflation in subdivision60.426, paragraph (d), clause (2), for the rate year beginning on60.5July 1, 1998.60.6(c) For the purpose of applying the limit stated in60.7subdivision 26, paragraph (a), a nursing facility in Ramsey60.8county licensed for 176 beds on September 30, 1996, shall have60.9the prior year's allowable care-related per diem increased by60.10$0.803 and the prior year's other operating cost per diem60.11increased by $0.272 before adding the inflation in subdivision60.1226, paragraph (d), clause (2), for the rate year beginning on60.13July 1, 1998.60.14(d) For the purpose of applying the limit stated in60.15subdivision 26, paragraph (a), a nursing facility in Brown60.16county licensed for 86 beds on September 30, 1996, shall have60.17the prior year's allowable care-related per diem increased by60.18$0.850 and the prior year's other operating cost per diem60.19increased by $0.275 before adding the inflation in subdivision60.2026, paragraph (d), clause (2), for the rate year beginning on60.21July 1, 1998.60.22(e) For the rate year beginning July 1, 1998, the60.23commissioner shall compute the payment rate for a nursing60.24facility, which was licensed for 110 beds on May 1, 1997, was60.25granted approval in January 1994 for a replacement and60.26remodeling project under the moratorium exception process in60.27section 144A.073, and completed the approved replacement and60.28remodeling project on March 14, 1997, by increasing the other60.29operating cost spend-up limit under paragraph (a) by $1.64.60.30After computing the facility's payment rate for the rate year60.31beginning July 1, 1998, according to this section, the60.32commissioner shall make a one-year positive rate adjustment of60.3348 cents for increased real estate taxes resulting from60.34completion of the moratorium exception project, without60.35application of paragraphs (a) and (b).60.36(f) For the rate year beginning July 1, 1998, the61.1commissioner shall compute the payment rate for a nursing61.2facility exempted from care-related limits under subdivision 2b,61.3paragraph (d), clause (2), with a minimum of three-quarters of61.4its beds licensed to provide residential services for the61.5physically handicapped under Minnesota Rules, parts 9570.2000 to61.69570.3400, with the care-related spend-up limit under61.7subdivision 26, paragraph (a), increased by $13.21 for the rate61.8year beginning July 1, 1998, without application of subdivision61.926, paragraph (b). For rate years beginning on or after July 1,61.101999, the commissioner shall exclude that amount in calculating61.11the facility's operating cost per diem for purposes of applying61.12subdivision 26, paragraph (b).61.13(g) For the rate year beginning July 1, 1998, a nursing61.14facility in Canby, Minnesota, licensed for 75 beds shall be61.15reimbursed without the limitation imposed under subdivision 26,61.16paragraph (a), and for rate years beginning on or after July 1,61.171999, its base costs shall be calculated on the basis of its61.18September 30, 1997, cost report.61.19(h)(a) The nursing facility reimbursement changes in 61.20 paragraphs(i)(b) and(j)(c) shall apply in the sequence 61.21 specified in this section and Minnesota Rules, parts 9549.0010 61.22 to 9549.0080, beginning July 1, 1998. 61.23(i)(b) For rate years beginning on or after July 1, 1998, 61.24 the operating cost limits established in subdivisions 2, 2b, 2i, 61.25 3c, and 22, paragraph (d), and any previously effective 61.26 corresponding limits in law or rule shall not apply, except that 61.27 these cost limits shall still be calculated for purposes of 61.28 determining efficiency incentive per diems. For rate years 61.29 beginning on or after July 1, 1998, the total operating cost 61.30 payment rates for a nursing facility shall be the greater of the 61.31 total operating cost payment rates determined under this section 61.32 or the total operating cost payment rates in effect on June 30, 61.33 1998, subject to rate adjustments due to field audit or rate 61.34 appeal resolution. 61.35(j)(c) For rate years beginning on or after July 1, 1998, 61.36 the operating cost per diem referred to in subdivision 26, 62.1 paragraph (a), clauses (1) and (2), is the sum of the 62.2 care-related and other operating per diems for a given case mix 62.3 class. Any reductions to the combined operating per diem shall 62.4 be divided proportionately between the care-related and other 62.5 operating per diems. 62.6(k)(d) For rate years beginning on or after July 1, 1998, 62.7 the commissioner shall modify the determination of the spend-up 62.8 limits referred to in subdivision 26, paragraph (a), by indexing 62.9 each group's previous year's median value by the factor in 62.10 subdivision 26, paragraph (d), clause (2), plus one percentage 62.11 point. 62.12(l)(e) For rate years beginning on or after July 1, 1998, 62.13 the commissioner shall modify the determination of the high cost 62.14 limits referred to in subdivision 26, paragraph (b), by indexing 62.15 each group's previous year's high cost per diem limits at .5 and 62.16 one standard deviations above the median by the factor in 62.17 subdivision 26, paragraph (d), clause (2), plus one percentage 62.18 point. 62.19 Sec. 21. Minnesota Statutes 1998, section 256B.435, is 62.20 amended to read: 62.21 256B.435 [NURSING FACILITY REIMBURSEMENT SYSTEM EFFECTIVE 62.22 JULY 1, 2000.] 62.23 Subdivision 1. [IN GENERAL.] Effective July 1, 2000, the 62.24 commissioner shall implement a performance-based contracting 62.25 system to replace the current method of setting operating cost 62.26 payment rates under sections 256B.431 and 256B.434 and Minnesota 62.27 Rules, parts 9549.0010 to 9549.0080. Operating cost payment 62.28 rates for newly established facilities under Minnesota Rules, 62.29 part 9549.0057, shall be established using section 256B.431 and 62.30 Minnesota Rules, parts 9549.0010 to 9549.0070. A nursing 62.31 facility in operation on May 1, 1998, with payment rates not 62.32 established under section 256B.431 or 256B.434 on that date, is 62.33 ineligible for this performance-based contracting system. In 62.34 determining prospective payment rates of nursing facility 62.35 services, the commissioner shall distinguish between operating 62.36 costs and property-related costs. The commissioner of finance 63.1 shall include an annual inflationary adjustment in operating 63.2 costs for nursing facilities using the inflation factor 63.3 specified in subdivision 3 as a budget change request in each 63.4 biennial detailed expenditure budget submitted to the 63.5 legislature under section 16A.11. Property related payment 63.6 rates, including real estate taxes and special assessments, 63.7 shall be determined under section 256B.431 or 256B.434 or under 63.8 a new property-related reimbursement system, if one is 63.9 implemented by the commissioner under subdivision 3. 63.10 Subd. 1a. [REQUESTS FOR PROPOSALS.] (a) For nursing 63.11 facilities with rates established under section 256B.434 on 63.12 January 1, 2000, the commissioner shall renegotiate contracts 63.13 without requiring a response to a request for proposal, 63.14 notwithstanding the solicitation process described in chapter 63.15 16C. 63.16 (b) Prior to July 1, 2000, the commissioner shall publish 63.17 in the State Register a request for proposals to provide nursing 63.18 facility services according to this section. The commissioner 63.19 will consider proposals from all nursing facilities that have 63.20 payment rates established under section 256B.431. The 63.21 commissioner must respond to all proposals in a timely manner. 63.22 (c) In issuing a request for proposals, the commissioner 63.23 may develop reasonable requirements which, in the judgment of 63.24 the commissioner, are necessary to protect residents or ensure 63.25 that the performance-based contracting system furthers the 63.26 interests of the state of Minnesota. The request for proposals 63.27 may include, but need not be limited to: 63.28 (1) a requirement that nursing facility make reasonable 63.29 efforts to maximize Medicare payments on behalf of eligible 63.30 residents; 63.31 (2) requirements designed to prevent inappropriate or 63.32 illegal discrimination against residents enrolled in the medical 63.33 assistance program as compared to private paying residents; 63.34 (3) requirements designed to ensure that admissions to a 63.35 nursing facility are appropriate and that reasonable efforts are 63.36 made to place residents in home and community-based settings 64.1 when appropriate; 64.2 (4) a requirement to agree to participate in the 64.3 development of data collection systems and outcome-based 64.4 standards. Among other requirements specified by the 64.5 commissioner, each facility entering into a contract may be 64.6 required to pay an annual fee. The commissioner must use 64.7 revenue generated from the fees to contract with a qualified 64.8 consultant or contractor to develop data collection systems and 64.9 outcome-based contracting standards; 64.10 (5) a requirement that Medicare-certified contractors agree 64.11 to maintain Medicare cost reports and to submit them to the 64.12 commissioner upon request, or at times specified by the 64.13 commissioner; and that contractors that are not 64.14 Medicare-certified agree to maintain a uniform cost report in a 64.15 format established by the commissioner and to submit the report 64.16 to the commissioner upon request, or at times specified by the 64.17 commissioner; 64.18 (6) a requirement that demonstrates willingness and ability 64.19 to develop and maintain data collection and retrieval systems to 64.20 measure outcomes; and 64.21 (7) a requirement to provide all information and assurances 64.22 required by the terms and conditions of the federal waiver or 64.23 federal approval. 64.24 (d) In addition to the information and assurances contained 64.25 in the submitted proposals, the commissioner may consider the 64.26 following criteria in developing the terms of the contract: 64.27 (1) the facility's history of compliance with federal and 64.28 state laws and rules. A facility deemed to be in substantial 64.29 compliance with federal and state laws and rules is eligible to 64.30 respond to a request for proposals. A facility's compliance 64.31 history shall not be the sole determining factor in situations 64.32 where the facility has been sold and the new owners have 64.33 submitted a proposal; 64.34 (2) whether the facility has a record of excessive 64.35 licensure fines or sanctions or fraudulent cost reports; 64.36 (3) the facility's financial history and solvency; and 65.1 (4) other factors identified by the commissioner deemed 65.2 relevant to developing the terms of the contract, including a 65.3 determination that a contract with a particular facility is not 65.4 in the best interests of the residents of the facility or the 65.5 state of Minnesota. 65.6 (e) If the commissioner rejects the proposal of a nursing 65.7 facility, the commissioner shall provide written notice to the 65.8 facility of the reason for the rejection, including the factors 65.9 and evidence upon which the rejection was based. If the 65.10 rejection results in a termination of the nursing facility's 65.11 participation in the medical assistance program, procedures 65.12 specified in section 256B.48, subdivision 1a, shall apply. 65.13 (f) Notwithstanding the requirements of the solicitation 65.14 process described in chapter 16C, the commissioner may contract 65.15 with nursing facilities established according to section 65.16 144A.073 without issuing a request for proposals. 65.17 (g) Notwithstanding subdivision 1, after July 1, 2000, the 65.18 commissioner may contract with additional nursing facilities, 65.19 according to requests for proposals. 65.20 Subd. 2. [CONTRACT PROVISIONS.] (a) The performance-based 65.21 contract with each nursing facility must include provisions that: 65.22 (1) apply the resident case mix assessment provisions of 65.23 Minnesota Rules, parts 9549.0051, 9549.0058, and 9549.0059, or 65.24 another assessment system, with the goal of moving to a single 65.25 assessment system; 65.26 (2) monitor resident outcomes through various methods, such 65.27 as quality indicators based on the minimum data set and other 65.28 utilization and performance measures; 65.29 (3) require the establishment and use of a continuous 65.30 quality improvement process that integrates information from 65.31 quality indicators and regular resident and family satisfaction 65.32 interviews; 65.33 (4) require annual reporting of facility statistical and 65.34 cost information, including resident days by case mix category, 65.35 productive nursing hours, wages and benefits, and raw food costs 65.36 for use by the commissioner in the development of facility 66.1 profiles that include trends in payment and service utilization; 66.2 (5) require from each nursing facility an annual certified 66.3 audited financial statement consisting of a balance sheet, 66.4 income and expense statements, and an opinion from either a 66.5 licensed or certified public accountant, if a certified audit 66.6 was prepared, or unaudited financial statements if no certified 66.7 audit was prepared; and 66.8 (6) specify the method for resolving disputes; 66.9 (7) establish additional requirements and penalties for 66.10 nursing facilities not meeting the standards set forth in the 66.11 performance-based contract. 66.12 (b) The commissioner may develop additional incentive-based 66.13 payments for achieving specified outcomesspecified in each66.14contract. The specified facility-specific outcomes must be66.15measurable and approved by the commissioner. In establishing 66.16 the specified outcomes and related criteria, the commissioner 66.17 shall consider the following quality measures: 66.18 (1) excellent clinical outcomes; 66.19 (2) achievement of quality as determined by the department 66.20 of health in licensure and certification surveys, complaint 66.21 investigations, and case mix recommendations; 66.22 (3) positive impact on quality of life; 66.23 (4) level of consumer satisfaction; or 66.24 (5) any additional outcomes proposed by a nursing facility 66.25 that the commissioner finds desirable. 66.26 (c) The commissioner may also contract with nursing 66.27 facilities in other ways through requests for proposals, 66.28 including contracts on a risk or nonrisk basis, with nursing 66.29 facilities or consortia of nursing facilities, to provide 66.30 comprehensive long-term care coverage on a premium or capitated 66.31 basis. 66.32 (d) The commissioner may negotiate different contract terms 66.33 for different nursing facilities. 66.34 Subd. 2a. [DURATION AND TERMINATION OF CONTRACTS.] (a) All 66.35 contracts entered into under this section are for a term of one 66.36 year. Either party may terminate this contract at any time 67.1 without cause by providing 90 calendar days' advance written 67.2 notice to the other party. Notwithstanding section 16C.05, 67.3 subdivisions 2, paragraph (a); and 5, if neither party provides 67.4 written notice of termination, the contract shall be 67.5 renegotiated for additional one-year terms or the terms of the 67.6 existing contract will be extended for one year. The provisions 67.7 of the contract shall be renegotiated annually by the parties 67.8 prior to the expiration date of the contract. The parties may 67.9 voluntarily renegotiate the terms of the contract at any time by 67.10 mutual agreement. 67.11 (b) If a nursing facility fails to comply with the terms of 67.12 a contract, the commissioner shall provide reasonable notice 67.13 regarding the breach of contract and a reasonable opportunity 67.14 for the facility to come into compliance. If the facility fails 67.15 to come into compliance or to remain in compliance, the 67.16 commissioner may terminate the contract. If a contract is 67.17 terminated, provisions of section 256B.48, subdivision 1a, shall 67.18 apply. 67.19 Subd. 3. [PAYMENT RATE PROVISIONS.] (a) For rate years 67.20 beginning on or after July 1, 2000, within the limits of 67.21 appropriations specifically for this purpose, the commissioner 67.22 shall determine operating cost payment rates for each licensed 67.23 and certified nursing facility by indexing its operating cost 67.24 payment rates in effect on June 30, 2000, for inflation. The 67.25 inflation factor to be used must be based on the change in the 67.26 Consumer Price Index-All Items, United States city average 67.27 (CPI-U) as forecasted by Data Resources, Inc. in the fourth 67.28 quarter preceding the rate year. The CPI-U forecasted index for 67.29 operating cost payment rates shall be based on the 12-month 67.30 period from the midpoint of the nursing facility's prior rate 67.31 year to the midpoint of the rate year for which the operating 67.32 payment rate is being determined. The operating cost payment 67.33 rate to be inflated shall be the total payment rate in effect on 67.34 June 30, 2000, minus the portion determined to be the 67.35 property-related payment rate, minus the per diem amount of the 67.36 preadmission screening cost included in the nursing facility's 68.1 last payment rate established under section 256B.431. 68.2 (b) A per diem amount for preadmission screening will be 68.3 added onto the contract payment rates according to the method of 68.4 distribution of county allocation described in section 68.5 256B.0911, subdivision 6, paragraph (a). 68.6(b)(c) Beginning July 1, 2000, each nursing facility 68.7 subject to a performance-based contract under this section shall 68.8 choose one of two methods of payment for property-related costs: 68.9 (1) the method established in section256B.434256B.431; or 68.10 (2)the method established in section 256B.431the 68.11 property-related payment rate in effect on June 30, 2000, 68.12 indexed annually for inflation using the index specified in 68.13 paragraph (a). In calculating the property-related payment rate 68.14 under this method, the commissioner shall adjust the rate to 68.15 reflect a reduction in the licensed bed capacity which is 68.16 effective on or after October 1, 1998, and meets the 68.17 requirements of section 256B.431, subdivision 3a, paragraph (d), 68.18 clause (2). 68.19 Nursing facilities must notify the commissioner in writing 68.20 of their election on or before December 31, 1999. Once the 68.21 nursing facility has made the election in this paragraph, that 68.22 election shall remain in effect for at least four years or until 68.23 an alternative property payment system is developed. An 68.24 election to have a property-related payment rate set according 68.25 to clause (2) will prevent a nursing facility from changing its 68.26 option for the amount charged to residents occupying single-bed 68.27 rooms as described in Minnesota Rules, parts 9549.0060, subpart 68.28 11, and 9549.0070, subpart 3. Having a property-related payment 68.29 rate set under clause (2) will require a nursing facility to 68.30 keep its single-bed option that was chosen the last time its 68.31 rates were determined under section 256B.431 for the entire 68.32 four-year period. A nursing facility electing to have its 68.33 property-related payment rate effective July 1, 2000, 68.34 established under the method described in paragraph (c), clause 68.35 (1), shall also file a cost report for the reporting year ending 68.36 September 30, 1999, according to the procedures specified in 69.1 section 256B.431 and Minnesota Rules, parts 9549.0010 to 69.2 9549.0070. The cost report form shall be specified by the 69.3 commissioner. 69.4(c)(d) For rate years beginning on or after July 1, 2000, 69.5 the commissioner may implement a new method of payment for 69.6 property-related costs that addresses the capital needs of 69.7 nursing facilities. Notwithstanding paragraph(b)(c), the new 69.8 property payment system or systems, if implemented, shall 69.9 replace the currentmethodmethods of setting property payment 69.10 rates under sections 256B.431 and 256B.434. 69.11 Subd. 4. [CONTRACT PAYMENT RATES; APPEALS.] If an appeal 69.12 is pending concerning the cost-based payment rates that are the 69.13 basis for the calculation of the payment rate under this 69.14 section, the commissioner and the nursing facility may agree on 69.15 an interim contract rate to be used until the appeal is 69.16 resolved. When the appeal is resolved, the contract rate must 69.17 be adjusted retroactively according to the appeal decision. 69.18 Subd. 5. [EXEMPTIONS.] (a) A facility that elected to have 69.19 its property related payment rate established according to 69.20 subdivision 3, paragraph (c), clause (2), is not subject to the 69.21 moratorium on licensure or certification of new nursing home 69.22 beds in section 144A.071, unless the project results in a net 69.23 increase in bed capacity or involves relocation of beds from one 69.24 site to another. Contract payment rates must not be adjusted to 69.25 reflect any additional costs that a nursing facility incurs as a 69.26 result of a construction project undertaken under this 69.27 paragraph. In addition, as a condition of exercising this 69.28 exemption, a nursing facility must agree that any future medical 69.29 assistance payments for nursing facility services will not 69.30 reflect any additional costs attributable to the sale of a 69.31 nursing facility under this section and to construction 69.32 undertaken under this paragraph that otherwise would not be 69.33 authorized under the moratorium in sections 144A.071 and 69.34 144A.073. Nothing in this section prevents a nursing facility 69.35 from seeking approval of an exception to the moratorium through 69.36 the process established in sections 144A.071 and 144A.073, and 70.1 if approved the facility's rates shall be adjusted to reflect 70.2 the cost of the project. 70.3 (b) Notwithstanding section 256B.48, subdivision 6, 70.4 paragraphs (d) and (e), and according to any terms and 70.5 conditions contained in the facility's contract, a nursing 70.6 facility that is under contract with the commissioner under this 70.7 section is in compliance with section 256B.48, subdivision 6, 70.8 paragraph (b), if the facility is Medicare certified. 70.9 Subd. 6. [CONSUMER PROTECTION.] In addition to complying 70.10 with all applicable laws regarding consumer protection, as a 70.11 condition of entering into a contract under this section, a 70.12 nursing facility must agree to: 70.13 (1) establish resident grievance procedures that are 70.14 comparable to those required under section 256.045, subdivision 70.15 3; 70.16 (2) establish expedited grievance procedures to resolve 70.17 complaints made by short-stay residents; and 70.18 (3) make available to residents and families a copy of the 70.19 performance-based contract and outcomes to be achieved. 70.20 Subd. 7. [CONTRACTS ARE VOLUNTARY.] Participation of 70.21 nursing facilities in the medical assistance program is 70.22 voluntary. The terms and procedures governing the 70.23 performance-based contract are determined under this section and 70.24 through negotiations between the commissioner and nursing 70.25 facilities. 70.26 Subd. 8. [FEDERAL REQUIREMENTS.] The commissioner shall 70.27 implement the performance-based contracting system subject to 70.28 any required federal waivers or approval and in a manner that is 70.29 consistent with federal requirements. If a provision of this 70.30 section is inconsistent with a federal requirement, the federal 70.31 requirement supersedes the inconsistent provision. The 70.32 commissioner shall seek federal approval and request waivers as 70.33 necessary to implement this section. 70.34 Subd. 9. [EXTERNAL REVIEW PANEL.] The commissioner may 70.35 establish an external review panel consisting of persons 70.36 appointed by the commissioner for their expertise on issues 71.1 relating to nursing facility services, quality, payment systems, 71.2 and other matters, to advise the commissioner on the development 71.3 and implementation of the performance-based contracting system, 71.4 and to assist the commissioner in assessing the quality 71.5 components of the performance-based contracting system and 71.6 development of new ideas on how to improve various components 71.7 which may emerge. The external review panel must include, among 71.8 other members, representatives of nursing facilities. 71.9 Sec. 22. Minnesota Statutes 1998, section 256B.48, 71.10 subdivision 1a, is amended to read: 71.11 Subd. 1a. [TERMINATION.] If a nursing facility terminates 71.12 its participation in the medical assistance program, whether 71.13 voluntarily or involuntarily, the commissioner may authorize the 71.14 nursing facility to receive continued medical assistance 71.15 reimbursementonly on a temporary basisuntil medical assistance 71.16 residents can be relocated to nursing facilities participating 71.17 in the medical assistance program. 71.18 Sec. 23. Minnesota Statutes 1998, section 256B.48, 71.19 subdivision 1b, is amended to read: 71.20 Subd. 1b. [EXCEPTION.] Notwithstanding any agreement 71.21 between a nursing facility and the department of human services 71.22 or the provisions of this section or section 256B.411, other 71.23 than subdivision 1a, the commissioner may authorize continued 71.24 medical assistance payments to a nursing facility which ceased 71.25 intake of medical assistance recipients prior to July 1, 1983, 71.26 and which charges private paying residents rates that exceed 71.27 those permitted by subdivision 1, paragraph (a), for (i) 71.28 residents who resided in the nursing facility before July 1, 71.29 1983, or (ii) residents for whom the commissioner or any 71.30 predecessors of the commissioner granted a permanent individual 71.31 waiver prior to October 1, 1983. Nursing facilities seeking 71.32 continued medical assistance payments under this subdivision 71.33 shall make the reports required under subdivision 2, except that 71.34 on or after December 31, 1985, the financial statements required 71.35 need not be audited by or contain the opinion of a certified 71.36 public accountant or licensed public accountant, but need only 72.1 be reviewed by a certified public accountant or licensed public 72.2 accountant. In the event that the state is determined by the 72.3 federal government to be no longer eligible for the federal 72.4 share of medical assistance payments made to a nursing facility 72.5 under this subdivision, the commissioner may cease medical 72.6 assistance payments, under this subdivision, to that nursing 72.7 facility.Between October 1, 1992, and July 1, 1993, a facility72.8governed by this subdivision may elect to resume full72.9participation in the medical assistance program by agreeing to72.10comply with all of the requirements of the medical assistance72.11program, including the rate equalization law in subdivision 1,72.12paragraph (a), and all other requirements established in law or72.13rule, and to resume intake of new medical assistance recipients.72.14 Sec. 24. Minnesota Statutes 1998, section 256B.48, 72.15 subdivision 6, is amended to read: 72.16 Subd. 6. [MEDICARE CERTIFICATION.] (a) [DEFINITION.] For 72.17 purposes of this subdivision, "nursing facility" means a nursing 72.18 facility that is certified as a skilled nursing facility or, 72.19 after September 30, 1990, a nursing facility licensed under 72.20 chapter 144A that is certified as a nursing facility. 72.21 (b) [MEDICARE PARTICIPATION REQUIRED.] All nursing 72.22 facilities shall participate in Medicare part A and part B 72.23 unless, after submitting an application, Medicare certification 72.24 is denied by the federal health care financing administration. 72.25 Medicare review shall be conducted at the time of the annual 72.26 medical assistance review. Charges for Medicare-covered 72.27 services provided to residents who are simultaneously eligible 72.28 for medical assistance and Medicare must be billed to Medicare 72.29 part A or part B before billing medical assistance. Medical 72.30 assistance may be billed only for charges not reimbursed by 72.31 Medicare. 72.32 (c)[UNTIL SEPTEMBER 30, 1990.] Until September 30, 1990, a72.33nursing facility satisfies the requirements of paragraph (b)72.34if: (1) at least 50 percent of the facility's beds that are72.35licensed under section 144A and certified as skilled nursing72.36beds under the medical assistance program are Medicare73.1certified; or (2) if a nursing facility's beds are licensed73.2under section 144A, and some are medical assistance certified as73.3skilled nursing beds and others are medical assistance certified73.4as intermediate care facility I beds, at least 50 percent of the73.5facility's total skilled nursing beds and intermediate care73.6facility I beds or 100 percent of its skilled nursing beds,73.7whichever is less, are Medicare certified.73.8(d)[AFTER SEPTEMBER 30, 1990.] After September 30, 1990, a 73.9 nursing facility satisfies the requirements of paragraph (b) if 73.10 at least 50 percent of the facility's beds certified as nursing 73.11 facility beds under the medical assistance program are Medicare 73.12 certified. 73.13(e)(d) [CONFLICT WITH MEDICARE DISTINCT PART 73.14 REQUIREMENTS.] At the request of a facility, the commissioner of 73.15 human services may reduce the 50 percent Medicare participation 73.16 requirement in paragraphs (c) and (d) to no less than 20 percent 73.17 if the commissioner of health determines that, due to the 73.18 facility's physical plant configuration, the facility cannot 73.19 satisfy Medicare distinct part requirements at the 50 percent 73.20 certification level. To receive a reduction in the 73.21 participation requirement, a facility must demonstrate that the 73.22 reduction will not adversely affect access of Medicare-eligible 73.23 residents to Medicare-certified beds. 73.24(f)(e) [INSTITUTIONS FOR MENTAL DISEASE.] The commissioner 73.25 may grant exceptions to the requirements of paragraph (b) for 73.26 nursing facilities that are designated as institutions for 73.27 mental disease. 73.28(g)(f) [NOTICE OF RIGHTS.] The commissioner shall inform 73.29 recipients of their rights under this subdivision and section 73.30 144.651, subdivision 29. 73.31 Sec. 25. Minnesota Statutes 1998, section 256B.50, 73.32 subdivision 1, is amended to read: 73.33 Subdivision 1. [SCOPE.] A provider may appeal from a 73.34 determination of a payment rate established pursuant to this 73.35 chapter and reimbursement rules of the commissioner if the 73.36 appeal, if successful, would result in a change to the 74.1 provider's payment rate or to the calculation of maximum charges 74.2 to therapy vendors as provided by section 256B.433, subdivision 74.3 3. Appeals must be filed in accordance with procedures in this 74.4 section. This section does not apply to a request from a 74.5 resident or long-term care facility for reconsideration of the 74.6 classification of a resident under section 144.0722 or 74.7 144.0723. For rate years beginning on or after July 1, 2000, 74.8 the procedures in this section shall not apply. 74.9 Sec. 26. Minnesota Statutes 1998, section 256B.50, 74.10 subdivision 1e, is amended to read: 74.11 Subd. 1e. [ATTORNEY'S FEES AND COSTS.] (a) Notwithstanding 74.12 section 15.472, paragraph (a), for an issue appealed under 74.13 subdivision 1, the prevailing party in a contested case 74.14 proceeding or, if appealed, in subsequent judicial review, must 74.15 be awarded reasonable attorney's fees and costs incurred in 74.16 litigating the appeal, if the prevailing party shows that the 74.17 position of the opposing party was not substantially justified. 74.18 The procedures for awarding fees and costs set forth in section 74.19 15.474 must be followed in determining the prevailing party's 74.20 fees and costs except as otherwise provided in this 74.21 subdivision. For purposes of this subdivision, "costs" means 74.22 subpoena fees and mileage, transcript costs, court reporter 74.23 fees, witness fees, postage and delivery costs, photocopying and 74.24 printing costs, amounts charged the commissioner by the office 74.25 of administrative hearings, and direct administrative costs of 74.26 the department; and "substantially justified" means that a 74.27 position had a reasonable basis in law and fact, based on the 74.28 totality of the circumstances prior to and during the contested 74.29 case proceeding and subsequent review. 74.30 (b) When an award is made to the department under this 74.31 subdivision, attorney fees must be calculated at the cost to the 74.32 department. When an award is made to a provider under this 74.33 subdivision, attorney fees must be calculated at the rate 74.34 charged to the provider except that attorney fees awarded must 74.35 be the lesser of the attorney's normal hourly fee or $100 per 74.36 hour. 75.1 (c) In contested case proceedings involving more than one 75.2 issue, the administrative law judge shall determine what portion 75.3 of each party's attorney fees and costs is related to the issue 75.4 or issues on which it prevailed and for which it is entitled to 75.5 an award. In making that determination, the administrative law 75.6 judge shall consider the amount of time spent on each issue, the 75.7 precedential value of the issue, the complexity of the issue, 75.8 and other factors deemed appropriate by the administrative law 75.9 judge. 75.10 (d) When the department prevails on an issue involving more 75.11 than one provider, the administrative law judge shall allocate 75.12 the total amount of any award for attorney fees and costs among 75.13 the providers. In determining the allocation, the 75.14 administrative law judge shall consider each provider's monetary 75.15 interest in the issue and other factors deemed appropriate by 75.16 the administrative law judge. 75.17 (e) Attorney fees and costs awarded to the department for 75.18 proceedings under this subdivision must not be reported or 75.19 treated as allowable costs on the provider's cost report. 75.20 (f) Fees and costs awarded to a provider for proceedings 75.21 under this subdivision must be reimbursed to themby reporting75.22the amount of fees and costs awarded as allowable costs on the75.23provider's cost report for the reporting year in which they were75.24awarded. Fees and costs reported pursuant to this subdivision75.25must be included in the general and administrative cost category75.26but are not subject to categorical or overall cost limitations75.27established in rule or statutewithin 120 days of the final 75.28 decision on the award of attorney fees and costs. 75.29 (g) If the provider fails to pay the awarded attorney fees 75.30 and costs within 120 days of the final decision on the award of 75.31 attorney fees and costs, the department may collect the amount 75.32 due through any method available to it for the collection of 75.33 medical assistance overpayments to providers. Interest charges 75.34 must be assessed on balances outstanding after 120 days of the 75.35 final decision on the award of attorney fees and costs. The 75.36 annual interest rate charged must be the rate charged by the 76.1 commissioner of revenue for late payment of taxes that is in 76.2 effect on the 121st day after the final decision on the award of 76.3 attorney fees and costs. 76.4 (h) Amounts collected by the commissioner pursuant to this 76.5 subdivision must be deemed to be recoveries pursuant to section 76.6 256.01, subdivision 2, clause (15). 76.7 (i) This subdivision applies to all contested case 76.8 proceedings set on for hearing by the commissioner on or after 76.9 April 29, 1988, regardless of the date the appeal was filed. 76.10 Sec. 27. [REPEALER.] 76.11 Minnesota Statutes 1998, sections 256B.03, subdivision 2; 76.12 256B.431, subdivisions 2, 2a, 2c, 2f, 2h, 2j, 2k, 2l, 2m, 2n, 76.13 2o, 2p, 2q, 3, 3b, 3d, 3e, 3h, 3j, 4, 5, 7, 8, 9, 9a, 23, 24, 76.14 and 25; 256B.433; 256B.434; 256B.47, subdivisions 3 and 4; 76.15 256B.48, subdivision 9; and 256B.50, subdivisions 1f and 3, are 76.16 repealed effective July 1, 2000. 76.17 Sec. 28. [EFFECTIVE DATE.] 76.18 (a) Sections 6 and 21 are effective July 1, 1999. 76.19 (b) Sections 1 to 5, 7 to 20, and 22 to 26 are effective 76.20 July 1, 2000.