as introduced - 83rd Legislature (2003 - 2004) Posted on 12/15/2009 12:00am
1.1 A bill for an act 1.2 relating to human services; changing provisions for 1.3 nursing facility reimbursement; establishing a nursing 1.4 facility reimbursement system effective in 2005; 1.5 amending Minnesota Statutes 2002, sections 256B.431, 1.6 subdivisions 28, 29, 30, 35; 256B.432, subdivisions 1, 1.7 2, 5, by adding subdivisions; 256B.434, subdivisions 1.8 4a, 4b, 4c, 4d, by adding a subdivision; Minnesota 1.9 Statutes 2003 Supplement, section 256B.47, subdivision 1.10 2; proposing coding for new law in Minnesota Statutes, 1.11 chapter 256B. 1.12 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 1.13 Section 1. Minnesota Statutes 2002, section 256B.431, 1.14 subdivision 28, is amended to read: 1.15 Subd. 28. [NURSING FACILITY RATE INCREASES BEGINNING JULY 1.16 1, 1999, AND JULY 1, 2000.] (a) For the rate years beginning 1.17 July 1, 1999, and July 1, 2000, the commissioner shall make 1.18 available to each nursing facility reimbursed under this section 1.19 or section 256B.434 an adjustment to the total operating payment 1.20 rate. For nursing facilities reimbursed under this section or 1.21 section 256B.434, the July 1, 2000, operating payment rate 1.22 increases provided in this subdivision shall be applied to each 1.23 facility's June 30, 2000, operating payment rate. For each 1.24 facility, total operating costs shall be separated into costs 1.25 that are compensation related and all other costs. 1.26 Compensation-related costs include salaries, payroll taxes, and 1.27 fringe benefits for all employees except management fees, the 1.28 administrator, and central office staff. 2.1 (b) For the rate year beginning July 1, 1999, the 2.3 commissioner shall make available a rate increase for 2.4 compensation-related costs of 4.843 percent and a rate increase 2.5 for all other operating costs of 3.446 percent. 2.6 (c) For the rate year beginning July 1, 2000, the 2.7 commissioner shall make available: 2.8 (1) a rate increase for compensation-related costs of 3.632 2.9 percent; 2.10 (2) an additional rate increase for each case mix payment 2.11 rate which must be used to increase the per-hour pay rate of all 2.12 employees except management fees, the administrator, and central 2.13 office staff by an equal dollar amount and to pay associated 2.14 costs for FICA, the Medicare tax, workers' compensation 2.15 premiums, and federal and state unemployment insurance, to be 2.16 calculated according to clauses (i) to (iii): 2.17 (i) the commissioner shall calculate the arithmetic mean of 2.18 the 11 June 30, 2000, operating rates for each facility; 2.19 (ii) the commissioner shall construct an array of nursing 2.20 facilities from highest to lowest, according to the arithmetic 2.21 mean calculated in clause (i). A numerical rank shall be 2.22 assigned to each facility in the array. The facility with the 2.23 highest mean shall be assigned a numerical rank of one. The 2.24 facility with the lowest mean shall be assigned a numerical rank 2.25 equal to the total number of nursing facilities in the array. 2.26 All other facilities shall be assigned a numerical rank in 2.27 accordance with their position in the array; 2.28 (iii) the amount of the additional rate increase shall be 2.29 $1 plus an amount equal to $3.13 multiplied by the ratio of the 2.30 facility's numeric rank divided by the number of facilities in 2.31 the array; and 2.32 (3) a rate increase for all other operating costs of 2.585 2.33 percent. 2.34 Money received by a facility as a result of the additional 2.35 rate increase provided under clause (2) shall be used only for 2.36 wage increases implemented on or after July 1, 2000, and shall 2.37 not be used for wage increases implemented prior to that date. 3.1 (d) The payment rate adjustment for each nursing facility 3.2 must be determined under clause (1) or (2): 3.3 (1) for each nursing facility that reports salaries for 3.4 registered nurses, licensed practical nurses, aides, orderlies, 3.5 and attendants separately, the commissioner shall determine the 3.6 payment rate adjustment using the categories specified in 3.7 paragraph (a) multiplied by the rate increases specified in 3.8 paragraph (b) or (c), and then dividing the resulting amount by 3.9 the nursing facility's actual resident days. In determining the 3.10 amount of a payment rate adjustment for a nursing facility 3.11 reimbursed under section 256B.434, the commissioner shall 3.12 determine the proportions of the facility's rates that are 3.13 compensation-related costs and all other operating costs based 3.14 on the facility's most recent cost report; and 3.15 (2) for each nursing facility that does not report salaries 3.16 for registered nurses, licensed practical nurses, aides, 3.17 orderlies, and attendants separately, the payment rate 3.18 adjustment shall be computed using the facility's total 3.19 operating costs, separated into the categories specified in 3.20 paragraph (a) in proportion to the weighted average of all 3.21 facilities determined under clause (1), multiplied by the rate 3.22 increases specified in paragraph (b) or (c), and then dividing 3.23 the resulting amount by the nursing facility's actual resident 3.24 days. 3.25 (e) A nursing facility may apply for the 3.26 compensation-related payment rate adjustment calculated under 3.27 this subdivision. The application must be made to the 3.28 commissioner and contain a plan by which the nursing facility 3.29 will distribute the compensation-related portion of the payment 3.30 rate adjustment to employees of the nursing facility. For 3.31 nursing facilities in which the employees are represented by an 3.32 exclusive bargaining representative, an agreement negotiated and 3.33 agreed to by the employer and the exclusive bargaining 3.34 representative constitutes the plan. For the second rate year, 3.35 a negotiated agreement constitutes the plan only if the 3.36 agreement is finalized after the date of enactment of all rate 4.1 increases for the second rate year. The commissioner shall 4.2 review the plan to ensure that the payment rate adjustment per 4.3 diem is used as provided in paragraphs (a) to (c). To be 4.4 eligible, a facility must submit its plan for the compensation 4.5 distribution by December 31 each year. A facility may amend its 4.6 plan for the second rate year by submitting a revised plan by 4.7 December 31, 2000. If a facility's plan for compensation 4.8 distribution is effective for its employees after July 1 of the 4.9 year that the funds are available, the payment rate adjustment 4.10 per diem shall be effective the same date as its plan. 4.11 (f) A copy of the approved distribution plan must be made 4.12 available to all employees. This must be done by giving each 4.13 employee a copy or by posting it in an area of the nursing 4.14 facility to which all employees have access. If an employee 4.15 does not receive the compensation adjustment described in their 4.16 facility's approved plan and is unable to resolve the problem 4.17 with the facility's management or through the employee's union 4.18 representative, the employee may contact the commissioner at an 4.19 address or phone number provided by the commissioner and 4.20 included in the approved plan. 4.21 (g) If the reimbursement system under section 256B.435 is 4.22 not implemented until July 1, 2001, the salary adjustment per 4.23 diem authorized in subdivision 2i, paragraph (c), shall continue 4.24 until June 30, 2001. 4.25 (h) For the rate year beginning July 1, 1999, the following 4.26 nursing facilities shall be allowed a rate increase equal to 67 4.27 percent of the rate increase that would be allowed if 4.28 subdivision 26, paragraph (a), was not applied: 4.29 (1) a nursing facility in Carver County licensed for 33 4.30 nursing home beds and four boarding care beds; 4.31 (2) a nursing facility in Faribault County licensed for 159 4.32 nursing home beds on September 30, 1998; and 4.33 (3) a nursing facility in Houston County licensed for 68 4.34 nursing home beds on September 30, 1998. 4.35 (i) For the rate year beginning July 1, 1999, the following 4.36 nursing facilities shall be allowed a rate increase equal to 67 5.1 percent of the rate increase that would be allowed if 5.2 subdivision 26, paragraphs (a) and (b), were not applied: 5.3 (1) a nursing facility in Chisago County licensed for 135 5.4 nursing home beds on September 30, 1998; and 5.5 (2) a nursing facility in Murray County licensed for 62 5.6 nursing home beds on September 30, 1998. 5.7 (j) For the rate year beginning July 1, 1999, a nursing 5.8 facility in Hennepin County licensed for 134 beds on September 5.9 30, 1998, shall: 5.10 (1) have the prior year's allowable care-related per diem 5.11 increased by $3.93 and the prior year's other operating cost per 5.12 diem increased by $1.69 before adding the inflation in 5.13 subdivision 26, paragraph (d), clause (2); and 5.14 (2) be allowed a rate increase equal to 67 percent of the 5.15 rate increase that would be allowed if subdivision 26, 5.16 paragraphs (a) and (b), were not applied. 5.17 The increases provided in paragraphs (h), (i), and (j) 5.18 shall be included in the facility's total payment rates for the 5.19 purposes of determining future rates under this section
or any5.20 other section. 5.21 (k) For the rate years beginning on or after July 1, 2000, 5.22 a nursing home facility in Goodhue County that was licensed for 5.23 104 beds on February 1, 2000, shall have its employee pension 5.24 benefit costs reported on its Rule 50 cost report treated as 5.25 PERA contributions for the purpose of computing its payment 5.26 rates. 5.27 Sec. 2. Minnesota Statutes 2002, section 256B.431, 5.28 subdivision 29, is amended to read: 5.29 Subd. 29. [FACILITY RATE INCREASES EFFECTIVE JULY 1, 5.30 2000.] Following the determination under subdivision 28 of the 5.31 payment rate for the rate year beginning July 1, 2000, for a 5.32 facility in Roseau County licensed for 49 beds, the facility's 5.33 operating cost per diem shall be increased by the following 5.34 amounts: 5.35 (1) case mix class A, $1.97; 5.36 (2) case mix class B, $2.11; 6.1 (3) case mix class C, $2.26; 6.2 (4) case mix class D, $2.39; 6.3 (5) case mix class E, $2.54; 6.4 (6) case mix class F, $2.55; 6.5 (7) case mix class G, $2.66; 6.6 (8) case mix class H, $2.90; 6.7 (9) case mix class I, $2.97; 6.8 (10) case mix class J, $3.10; and 6.9 (11) case mix class K, $3.36. 6.10 These increases shall be included in the facility's total 6.11 payment rates for the purpose of determining future rates under 6.12 this section or any other section. 6.13 Sec. 3. Minnesota Statutes 2002, section 256B.431, 6.14 subdivision 30, is amended to read: 6.15 Subd. 30. [BED LAYAWAY AND DELICENSURE.] (a) For rate 6.16 years beginning on or after July 1, 2000October 1, 2005, a 6.17 nursing facility reimbursed under this section which has placed 6.18 beds on layaway or removed beds from layaway, or delicensed beds 6.19 shall, for purposes of application of the downsizing incentive6.20 in subdivision 3a, paragraph (c), and calculation of the rental6.21 per diemdetermination of the payment rate for property-related 6.22 costs under section 256B.440, subdivision 63, have those 6.23 beds placed in layaway given the same effect as if the beds had 6.24 been delicensed so long as the beds remain on layaway, and have 6.25 the number of beds used in the calculation in section 256B.440, 6.26 subdivision 63, paragraph (f), be based on the number of 6.27 licensed beds less the number that are in layaway. At the time6.28 of a layaway, a facility may change its single bed election for6.29 use in calculating capacity days under Minnesota Rules, part6.30 9549.0060, subpart 11.The property payment rate 6.31 increasechanges shall be effective the first day of the month6.32 following the month in whichApril 1 for the layaway of the beds 6.33 becomes, the removal of beds from layaway, and the delicensure 6.34 of beds that become effective under section 144A.071, 6.35 subdivision 4b, between the prior August 1 and January 31. The 6.36 property payment rate changes shall be effective October 1 for 7.1 the layaway of the beds, the removal of beds from layaway, and 7.2 the delicensure of beds that become effective under section 7.3 144A.071, subdivision 4b, between the prior February 1 and July 7.4 31. 7.5 (b) For rate years beginning on or after July 1, 2000,7.6 notwithstanding any provision to the contrary under section7.7 256B.434, a nursing facility reimbursed under that section which7.8 has placed beds on layaway shall, for so long as the beds remain7.9 on layaway, be allowed to:7.10 (1) aggregate the applicable investment per bed limits7.11 based on the number of beds licensed immediately prior to7.12 entering the alternative payment system;7.13 (2) retain or change the facility's single bed election for7.14 use in calculating capacity days under Minnesota Rules, part7.15 9549.0060, subpart 11; and7.16 (3) establish capacity days based on the number of beds7.17 immediately prior to the layaway and the number of beds after7.18 the layaway.7.19 The commissioner shall increase the facility's property payment7.20 rate by the incremental increase in the rental per diem7.21 resulting from the recalculation of the facility's rental per7.22 diem applying only the changes resulting from the layaway of7.23 beds and clauses (1), (2), and (3). If a facility reimbursed7.24 under section 256B.434 completes a moratorium exception project7.25 after its base year, the base year property rate shall be the7.26 moratorium project property rate. The base year rate shall be7.27 inflated by the factors in section 256B.434, subdivision 4,7.28 paragraph (c). The property payment rate increase shall be7.29 effective the first day of the month following the month in7.30 which the layaway of the beds becomes effective.7.31 (c) If a nursing facility removes a bed from layaway status7.32 in accordance with section 144A.071, subdivision 4b, the7.33 commissioner shall establish capacity days based on the number7.34 of licensed and certified beds in the facility not on layaway7.35 and shall reduce the nursing facility's property payment rate in7.36 accordance with paragraph (b).8.1 (d) For the rate years beginning on or after July 1, 2000,8.2 notwithstanding any provision to the contrary under section8.3 256B.434, a nursing facility reimbursed under that section,8.4 which has delicensed beds after July 1, 2000, by giving notice8.5 of the delicensure to the commissioner of health according to8.6 the notice requirements in section 144A.071, subdivision 4b,8.7 shall be allowed to:8.8 (1) aggregate the applicable investment per bed limits8.9 based on the number of beds licensed immediately prior to8.10 entering the alternative payment system;8.11 (2) retain or change the facility's single bed election for8.12 use in calculating capacity days under Minnesota Rules, part8.13 9549.0060, subpart 11; and8.14 (3) establish capacity days based on the number of beds8.15 immediately prior to the delicensure and the number of beds8.16 after the delicensure.8.17 The commissioner shall increase the facility's property payment8.18 rate by the incremental increase in the rental per diem8.19 resulting from the recalculation of the facility's rental per8.20 diem applying only the changes resulting from the delicensure of8.21 beds and clauses (1), (2), and (3). If a facility reimbursed8.22 under section 256B.434 completes a moratorium exception project8.23 after its base year, the base year property rate shall be the8.24 moratorium project property rate. The base year rate shall be8.25 inflated by the factors in section 256B.434, subdivision 4,8.26 paragraph (c). The property payment rate increase shall be8.27 effective the first day of the month following the month in8.28 which the delicensure of the beds becomes effective.8.29 (e) For nursing facilities reimbursed under this section or8.30 section 256B.434, any beds placed on layaway shall not be8.31 included in calculating facility occupancy as it pertains to8.32 leave days defined in Minnesota Rules, part 9505.0415.8.33 (f) For nursing facilities reimbursed under this section or8.34 section 256B.434, the rental rate calculated after placing beds8.35 on layaway may not be less than the rental rate prior to placing8.36 beds on layaway.9.1 (g)(b) A nursing facility receiving a rate adjustment as a 9.2 result of this section shall comply with section 256B.47, 9.3 subdivision 2. 9.4 (h) A facility that does not utilize the space made9.5 available as a result of bed layaway or delicensure under this9.6 subdivision to reduce the number of beds per room or provide9.7 more common space for nursing facility uses or perform other9.8 activities related to the operation of the nursing facility9.9 shall have its property rate increase calculated under this9.10 subdivision reduced by the ratio of the square footage made9.11 available that is not used for these purposes to the total9.12 square footage made available as a result of bed layaway or9.13 delicensure.9.14 Sec. 4. Minnesota Statutes 2002, section 256B.431, 9.15 subdivision 35, is amended to read: 9.16 Subd. 35. [EXCLUSION OF RAW FOOD COST ADJUSTMENT.] For 9.17 rate years beginning on or after July 1, 2001, in calculating a 9.18 nursing facility's operating cost per diem for the purposes of 9.19 constructing an array, determining a median, or otherwise 9.20 performing a statistical measure of nursing facility payment 9.21 rates to be used to determine future rate increases under this 9.22 section, section 256B.434, or any other section, the 9.23 commissioner shall exclude adjustments for raw food costs under 9.24 subdivision 2b, paragraph (h), that are related to providing 9.25 special diets based on religious beliefs. For rates determined 9.26 under section 256B.440, the amount determined under subdivision 9.27 2b, paragraph (h), shall not be included in the support services 9.28 per diem cost determined in section 256B.440, subdivision 56, 9.29 and shall be added to the external fixed cost costs payment rate 9.30 determined in section 246B.440, subdivision 62, paragraph (i). 9.31 Sec. 5. Minnesota Statutes 2002, section 256B.432, 9.32 subdivision 1, is amended to read: 9.33 Subdivision 1. [DEFINITIONS.] For purposes of this 9.34 section, the following terms have the meanings given them. 9.35 (a) "Management agreement" means an agreement in which one 9.36 or more of the following criteria exist: 10.1 (1) the central, affiliated, or corporate office has or is 10.2 authorized to assume day-to-day operational control of the 10.3 nursing facility for any six-month period within a 24-month 10.4 period. "Day-to-day operational control" means that the 10.5 central, affiliated, or corporate office has the authority to 10.6 require, mandate, direct, or compel the employees of the nursing 10.7 facility to perform or refrain from performing certain acts, or 10.8 to supplant or take the place of the top management of the 10.9 nursing facility. "Day-to-day operational control" includes the 10.10 authority to hire or terminate employees or to provide an 10.11 employee of the central, affiliated, or corporate office to 10.12 serve as administrator of the nursing facility; 10.13 (2) the central, affiliated, or corporate office performs 10.14 or is authorized to perform two or more of the following: the 10.15 execution of contracts; authorization of purchase orders; 10.16 signature authority for checks, notes, or other financial 10.17 instruments; requiring the nursing facility to use the group or 10.18 volume purchasing services of the central, affiliated, or 10.19 corporate office; or the authority to make annual capital 10.20 expenditures for the nursing facility exceeding $50,000, or $500 10.21 per licensed bed, whichever is less, without first securing the 10.22 approval of the nursing facility board of directors; 10.23 (3) the central, affiliated, or corporate office becomes or 10.24 is required to become the licensee under applicable state law; 10.25 (4) the agreement provides that the compensation for 10.26 services provided under the agreement is directly related to any 10.27 profits made by the nursing facility; or 10.28 (5) the nursing facility entering into the agreement is 10.29 governed by a governing body that meets fewer than four times a 10.30 year, that does not publish notice of its meetings, or that does 10.31 not keep formal records of its proceedings. 10.32 (b) "Consulting agreement" means any agreement the purpose 10.33 of which is for a central, affiliated, or corporate office to 10.34 advise, counsel, recommend, or suggest to the owner or operator 10.35 of the nonrelated nursing facility measures and methods for 10.36 improving the operations of the nursing facility. 11.1 (c) "Nursing facility" means a nursing facility whose 11.2 medical assistance rates are determined according to section 11.3 256B.431256B.440. 11.4 Sec. 6. Minnesota Statutes 2002, section 256B.432, 11.5 subdivision 2, is amended to read: 11.6 Subd. 2. [EFFECTIVE DATE.] For rate years beginning on or 11.7 after July 1, 1990, the central, affiliated, or corporate office 11.8 cost allocations in subdivisions 3 to 6 must be used when 11.9 determining medical assistance rates under section 256B.43111.10 256B.440. 11.11 Sec. 7. Minnesota Statutes 2002, section 256B.432, is 11.12 amended by adding a subdivision to read: 11.13 Subd. 4a. [ALLOCATION; COSTS ALLOCABLE ON A FUNCTIONAL 11.14 BASIS.] (a) Costs that have not been directly identified must be 11.15 allocated to nursing facilities on a basis designed to equitably 11.16 allocate the costs to the nursing facilities or activities 11.17 receiving the benefits of the costs. This allocation must be 11.18 made in a manner reasonably related to the services received by 11.19 the nursing facilities. Where practical and the amounts are 11.20 material, these costs must be allocated on a functional basis. 11.21 The functions, or cost centers used to allocate central office 11.22 costs, and the unit bases used to allocate the costs, including 11.23 those central office costs allocated according to subdivision 5, 11.24 must be used consistently from one central office accounting 11.25 period to another. 11.26 (b) If the central office wishes to change its allocation 11.27 bases and believes the change will result in more appropriate 11.28 and more accurate allocations, the central office must make a 11.29 written request, with its justification, to the commissioner for 11.30 approval of the change no later than 120 days after the 11.31 beginning of the central office accounting period to which the 11.32 change is to apply. The commissioner's approval of a central 11.33 office request will be furnished to the central office in 11.34 writing. Where the commissioner approves the central office 11.35 request, the change must be applied to the accounting period for 11.36 which the request was made, and to all subsequent central office 12.1 accounting periods unless the commissioner approves a subsequent 12.2 request for change by the central office. The effective date of 12.3 the change will be the beginning of the accounting period for 12.4 which the request was made. 12.5 Sec. 8. Minnesota Statutes 2002, section 256B.432, 12.6 subdivision 5, is amended to read: 12.7 Subd. 5. [ALLOCATION OF REMAINING COSTS; ALLOCATION 12.8 RATIO.] (a) After the costs that can be directly identified 12.9 according to subdivisions 3 and 4 have been allocated, the 12.10 remaining central, affiliated, or corporate office costs must be 12.11 allocated between the nursing facility operations and the other 12.12 activities or facilities unrelated to the nursing facility 12.13 operations based on the ratio of total operating 12.14 costs. However, in the event that these remaining costs are 12.15 partially attributable to the start-up of home and 12.16 community-based services intended to fill a gap identified by 12.17 the local agency, the facility may assign these remaining costs 12.18 to the appropriate cost category of the facility for a period 12.19 not to exceed two years. 12.20 (b) For purposes of allocating these remaining central, 12.21 affiliated, or corporate office costs, the numerator for the 12.22 allocation ratio shall be determined as follows: 12.23 (1) for nursing facilities that are related organizations 12.24 or are controlled by a central, affiliated, or corporate office 12.25 under a management agreement, the numerator of the allocation 12.26 ratio shall be equal to the sum of the total operating costs 12.27 incurred by each related organization or controlled nursing 12.28 facility; 12.29 (2) for a central, affiliated, or corporate office 12.30 providing goods or services to related organizations that are 12.31 not nursing facilities, the numerator of the allocation ratio 12.32 shall be equal to the sum of the total operating costs incurred 12.33 by the nonnursing facility related organizations; 12.34 (3) for a central, affiliated, or corporate office 12.35 providing goods or services to unrelated nursing facilities 12.36 under a consulting agreement, the numerator of the allocation 13.1 ratio shall be equal to the greater of directly identified 13.2 central, affiliated, or corporate costs or the contracted 13.3 amount; or 13.4 (4) for business activities that involve the providing of 13.5 goods or services to unrelated parties which are not nursing 13.6 facilities, the numerator of the allocation ratio shall be equal 13.7 to the greater of directly identified costs or revenues 13.8 generated by the activity or function. 13.9 (c) The denominator for the allocation ratio is the sum of 13.10 the numerators in paragraph (b), clauses (1) to (4). 13.11 Sec. 9. Minnesota Statutes 2002, section 256B.432, is 13.12 amended by adding a subdivision to read: 13.13 Subd. 6a. [RELATED ORGANIZATION COSTS.] Costs applicable 13.14 to services, capital assets, and supplies directly or indirectly 13.15 furnished to the nursing facility by any related organization 13.16 are includable in the allowable cost of the nursing facility at 13.17 the purchase price paid by the related organization for capital 13.18 assets or supplies and at the cost incurred by the related 13.19 organization for the provision of services to the nursing 13.20 facility if these prices or costs do not exceed the price of 13.21 comparable services, capital assets, or supplies that could be 13.22 purchased elsewhere. For this purpose, the related 13.23 organization's costs must not include an amount for markup or 13.24 profit. 13.25 If the related organization in the normal course of 13.26 business sells services, capital assets, or supplies to 13.27 nonrelated organizations, the cost to the nursing facility shall 13.28 be the nonrelated organization's price provided that sales to 13.29 nonrelated organizations constitute at least 50 percent of total 13.30 annual sales of similar services, capital assets, or supplies. 13.31 Sec. 10. Minnesota Statutes 2002, section 256B.434, 13.32 subdivision 4a, is amended to read: 13.33 Subd. 4a. [FACILITY RATE INCREASES.] For the rate year 13.34 beginning July 1, 1999, the nursing facilities described in 13.35 clauses (1) to (5) shall receive the rate increases indicated. 13.36 The increases provided under this subdivision shall be included 14.1 in the facility's total payment rates for the purpose of 14.2 determining future rates under this section or any other section: 14.3 (1) a nursing facility in Becker County licensed for 102 14.4 nursing home beds on September 30, 1998, shall receive an 14.5 increase of $1.30 in its case mix class A payment rate; an 14.6 increase of $1.33 in its case mix class B payment rate; an 14.7 increase of $1.36 in its case mix class C payment rate; an 14.8 increase of $1.39 in its case mix class D payment rate; an 14.9 increase of $1.42 in its case mix class E payment rate; an 14.10 increase of $1.42 in its case mix class F payment rate; an 14.11 increase of $1.45 in its case mix class G payment rate; an 14.12 increase of $1.49 in its case mix class H payment rate; an 14.13 increase of $1.51 in its case mix class I payment rate; an 14.14 increase of $1.54 in its case mix class J payment rate; and an 14.15 increase of $1.59 in its case mix class K payment rate; 14.16 (2) a nursing facility in Chisago County licensed for 101 14.17 nursing home beds on September 30, 1998, shall receive an 14.18 increase of $3.67 in each case mix payment rate; 14.19 (3) a nursing facility in Canby, licensed for 75 beds shall 14.20 have its property-related per diem rate increased by $1.21. 14.21 This increase shall be recognized in the facility's contract 14.22 payment rate under this section; 14.23 (4) a nursing facility in Golden Valley with all its beds 14.24 licensed to provide residential rehabilitative services to young 14.25 adults under Minnesota Rules, parts 9570.2000 to 9570.3400, 14.26 shall have the payment rate computed according to this section 14.27 increased by $14.83; and 14.28 (5) a county-owned 130-bed nursing facility in Park Rapids 14.29 shall have its per diem contract payment rate increased by $1.02 14.30 for costs related to compliance with comparable worth 14.31 requirements. 14.32 Sec. 11. Minnesota Statutes 2002, section 256B.434, 14.33 subdivision 4b, is amended to read: 14.34 Subd. 4b. [FACILITY RATE INCREASES EFFECTIVE JULY 1, 14.35 2000.] For the rate year beginning July 1, 2000, the nursing 14.36 facilities described in clauses (1) to (6) shall receive the 15.1 rate increases indicated. The increases under this subdivision 15.2 shall be added following the determination under section 15.3 256B.431, subdivision 28, of the payment rate for the rate year 15.4 beginning July 1, 2000, and shall be included in the facility's 15.5 total payment rates for the purposes of determining future rates 15.6 under this section or any other section: 15.7 (1) a nursing facility in Hennepin County licensed for 290 15.8 beds shall receive an operating cost per diem increase of 5.9 15.9 percent, provided that the facility delicenses, decertifies, or 15.10 places on layaway status, if that status is otherwise permitted 15.11 by law, 70 beds; 15.12 (2) a nursing facility in Goodhue County licensed for 84 15.13 beds shall receive an increase of $1.54 in each case mix payment 15.14 rate; 15.15 (3) a nursing facility located in Rochester and licensed 15.16 for 103 beds on January 1, 2000, shall receive an increase in 15.17 its case mix resident class A payment of $3.78, and an increase 15.18 in the payment rate for all other case mix classes of that 15.19 amount multiplied by the class weight for that case mix class 15.20 established in Minnesota Rules, part 9549.0058, subpart 3; 15.21 (4) a nursing facility in Wright County licensed for 154 15.22 beds shall receive an increase of $2.03 in each case mix payment 15.23 rate to be used for employee wage and benefit enhancements; 15.24 (5) a facility in Todd County licensed for 78 beds, shall 15.25 have its operating cost per diem increased by the following 15.26 amounts: 15.27 (i) case mix class A, $1.16; 15.28 (ii) case mix class B, $1.50; 15.29 (iii) case mix class C, $1.89; 15.30 (iv) case mix class D, $2.26; 15.31 (v) case mix class E, $2.63; 15.32 (vi) case mix class F, $2.65; 15.33 (vii) case mix class G, $2.96; 15.34 (viii) case mix class H, $3.55; 15.35 (ix) case mix class I, $3.76; 15.36 (x) case mix class J, $4.08; and 16.1 (xi) case mix class K, $4.76; and 16.2 (6) a nursing facility in Pine City that decertified 22 16.3 beds in calendar year 1999 shall have its property-related per 16.4 diem payment rate increased by $1.59. 16.5 Sec. 12. Minnesota Statutes 2002, section 256B.434, 16.6 subdivision 4c, is amended to read: 16.7 Subd. 4c. [FACILITY RATE INCREASES EFFECTIVE JANUARY 1, 16.8 2002.] For the rate period beginning January 1, 2002, and for 16.9 the rate year beginning July 1, 2002, a nursing facility in 16.10 Morrison County licensed for 83 beds as of March 1, 2001, shall 16.11 receive an increase of $2.54 in each case mix payment rate to 16.12 offset property tax payments due as a result of the facility's 16.13 conversion from nonprofit to for-profit status. The increase 16.14 under this subdivision shall be added following the 16.15 determination under this chapter of the payment rate for the 16.16 rate year beginning July 1, 2001, and shall be included in the 16.17 facility's total payment rates for the purposes of determining 16.18 future rates under this section or any other section. 16.19 Sec. 13. Minnesota Statutes 2002, section 256B.434, 16.20 subdivision 4d, is amended to read: 16.21 Subd. 4d. [FACILITY RATE INCREASES EFFECTIVE JULY 1, 16.22 2001.] For the rate year beginning July 1, 2001, a nursing 16.23 facility in Hennepin County licensed for 302 beds shall receive 16.24 an increase of 29 cents in each case mix payment rate to correct 16.25 an error in the cost-reporting system that occurred prior to the 16.26 date that the facility entered the alternative payment 16.27 demonstration project. The increase under this subdivision 16.28 shall be added following the determination under this chapter of 16.29 the payment rate for the rate year beginning July 1, 2001, and 16.30 shall be included in the facility's total payment rates for the 16.31 purposes of determining future rates under this section or any16.32 other section. 16.33 Sec. 14. Minnesota Statutes 2002, section 256B.434, is 16.34 amended by adding a subdivision to read: 16.35 Subd. 18. [PHASE-OUT OF ALTERNATIVE PAYMENT SYSTEM 16.36 CONTRACTS.] Nursing facilities that have entered into a contract 17.1 with the commissioner under the provisions of this section will 17.2 cease their contractual agreement with the commissioner 12 17.3 months following the effective date of the contract in effect on 17.4 October 1, 2005. Nursing facilities with a contract in effect 17.5 on October 1, 2005, shall be paid the contract payment rate for 17.6 the remainder of the phase-in period according to the provisions 17.7 of section 256B.440, subdivision 65, except as provided in 17.8 section 256B.440, subdivision 63, paragraph (i). 17.9 Sec. 15. [256B.440] [NURSING FACILITY REIMBURSEMENT SYSTEM 17.10 EFFECTIVE OCTOBER 1, 2005.] 17.11 Subdivision 1. [IN GENERAL.] (a) The commissioner shall 17.12 establish a value-based nursing facility reimbursement system 17.13 which will provide facility-specific, prospective rates for 17.14 nursing facilities participating in the medical assistance 17.15 program. The rates shall be determined using an annual 17.16 statistical and cost report filed by each nursing facility. The 17.17 total payment rate shall be composed of four cost categories: 17.18 case mix adjusted, support services, external fixed, and 17.19 property-related costs. The payment rate shall be derived from 17.20 statistical measures of actual costs incurred in facility 17.21 operation of nursing facilities. From this cost basis, the 17.22 components of the total payment rate shall be adjusted for 17.23 quality of services provided, actual costs of operation of each 17.24 facility, geographic variation in labor costs, rental value, and 17.25 acuity. 17.26 (b) Rates shall be rebased annually. Each cost reporting 17.27 year shall begin on October 1 and end on the following September 17.28 30. A cost report shall be filed by each nursing facility by 17.29 January 15. Notice of rates shall be distributed by August 15 17.30 and the rates shall go into effect on October 1 for one year. 17.31 (c) Nursing facilities shall file the first statistical and 17.32 cost report on or before January 15, 2005. The commissioner 17.33 shall begin to phase in the new reimbursement system beginning 17.34 October 1, 2005. Full phase-in shall be complete by October 1, 17.35 2008. 17.36 Subd. 2. [DEFINITIONS.] For purposes of this section, the 18.1 terms in subdivisions 3 to 53 have the meanings given unless 18.2 otherwise provided for in this section. 18.3 Subd. 3. [ACTIVE BEDS.] "Active beds" means licensed beds 18.4 that are not currently in layaway status. 18.5 Subd. 4. [ACTIVITIES COSTS.] "Activities costs" means 18.6 costs for the salaries and wages of the supervisor and other 18.7 activities workers, associated fringe benefits and payroll 18.8 taxes, supplies, services, and consultants. 18.9 Subd. 5. [ADMINISTRATIVE COSTS.] "Administrative costs" 18.10 means the direct costs for administering the overall activities 18.11 of the nursing home. These costs include salaries and wages of 18.12 the commissioner, assistant administrator, and business office 18.13 employees, and associated fringe benefits and payroll taxes, 18.14 fees, contracts, or purchases related to business office 18.15 functions, licenses, and permits except as provided in the 18.16 external fixed costs category, employee recognition, travel 18.17 including meals and lodging, training, voice and data 18.18 communication or transmission, office supplies, liability 18.19 insurance and other forms of insurance not designated to other 18.20 areas, personnel recruitment, legal services, accounting 18.21 services, management or business consultants, data processing, 18.22 central or home office costs, business meetings and seminars, 18.23 postage, fees for professional organizations, subscriptions, 18.24 security services, advertising, board of director's fees, 18.25 working capital interest expense, and bad debts and bad debt 18.26 collection fees. 18.27 Subd. 6. [ALLOWED COSTS.] "Allowed costs" means the 18.28 amounts reported by the facility which are necessary for the 18.29 operation of the facility and the care of residents and which 18.30 are reviewed by the department for accuracy, reasonableness, and 18.31 compliance with this section and generally accepted accounting 18.32 principles. 18.33 Subd. 7. [CENTER FOR MEDICARE AND MEDICAID 18.34 SERVICES.] "Center for Medicare and Medicaid services" means the 18.35 federal agency, in the United States Department of Health and 18.36 Human Services that administers Medicaid, also referred to as 19.1 "CMS." 19.2 Subd. 8. [COMMISSIONER.] "Commissioner" means the 19.3 commissioner of human services unless specified otherwise. 19.4 Subd. 9. [DEPRECIATION GUIDELINES.] "Depreciation 19.5 guidelines" means the most recent publication of "The Estimated 19.6 Useful Lives of Depreciable Hospital Assets," issued by the 19.7 American Hospital Association, 840 North Lake Shore Drive, 19.8 Chicago, Illinois 60611. 19.9 Subd. 10. [DESK AUDIT.] "Desk audit" means the 19.10 establishment of the payment rate based on the commissioner's 19.11 review and analysis of required reports, supporting 19.12 documentation, and work sheets submitted by the nursing facility. 19.13 Subd. 11. [DIETARY COSTS.] "Dietary costs" means the 19.14 salaries and wages of the dietary supervisor, dietitians, chefs, 19.15 cooks, dishwashers, and other employees assigned to the kitchen 19.16 and dining room, and associated fringe benefits and payroll 19.17 taxes. Dietary costs also includes the salaries or fees of 19.18 dietary consultants, direct costs of raw food (both normal and 19.19 special diet food), dietary supplies, and food preparation and 19.20 serving. Also included are special dietary supplements used for 19.21 tube feeding or oral feeding, such as elemental high nitrogen 19.22 diet, even if written as a prescription item by a physician. 19.23 Subd. 12. [DIRECT CARE COSTS CATEGORY.] "Direct care costs 19.24 category" means costs for nursing services, activities, and 19.25 social services. 19.26 Subd. 13. [EFFECTIVE AGE.] "Effective age" means the age 19.27 of a nursing facility adjusted for improvements made to the 19.28 property since it was originally constructed, purchased, or 19.29 leased. 19.30 Subd. 14. [EXTERNAL FIXED COSTS CATEGORY.] "External fixed 19.31 costs category" means costs related to the nursing home 19.32 surcharge under section 256.9657, subdivision 1; licensure fees 19.33 under section 144.122; long-term care consultation fees under 19.34 section 256B.0911, subdivision 6; family advisory council fee 19.35 under section 144A.35; scholarships under section 256B.431, 19.36 subdivision 36; planned closure rate adjustments under section 20.1 256B.437, subdivision 6; property taxes and property insurance; 20.2 PERA; and equipment allowance. 20.3 Subd. 15. [FACILITY AVERAGE CASE MIX INDEX 20.4 (CMI).] "Facility average case mix index" or "CMI" means a 20.5 numerical value score that describes the relative resource use 20.6 for all residents within the groups under the resource 20.7 utilization group (RUG-III) classification system prescribed by 20.8 the commissioner based on an assessment of each resident. The 20.9 facility average CMI shall be computed as the standardized days 20.10 divided by total days for all residents in the facility. 20.11 Subd. 16. [FIELD AUDIT.] "Field audit" means the on-site 20.12 examination, verification, and review of the financial records, 20.13 statistical records, and related supporting documentation on the 20.14 nursing home and any related organization. 20.15 Subd. 17. [FINAL RATE.] "Final rate" means the rate 20.16 established after any adjustment by the commissioner, including, 20.17 but not limited to, adjustments resulting from cost report 20.18 reviews and field audits. 20.19 Subd. 18. [FRINGE BENEFIT COSTS.] "Fringe benefit costs" 20.20 means group life, health, dental, and workers' compensation 20.21 insurance, and pension, profit-sharing, and retirement plans 20.22 generally available to all employees who work at least 20 hours 20.23 per week. 20.24 Subd. 19. [GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.] 20.25 "Generally Accepted Accounting Principles" means the body of 20.26 pronouncements adopted by the American Institute of Certified 20.27 Public Accountants regarding proper accounting procedures, 20.28 guidelines, and rules. 20.29 Subd. 20. [HISTORICAL COST.] "Historical cost" means the 20.30 direct costs incurred by the nursing facility of acquiring 20.31 services, supplies, or assets. 20.32 Subd. 21. [HOSPITAL-ATTACHED NURSING FACILITY STATUS.] (a) 20.33 For the purpose of setting rates under this section, for rate 20.34 years beginning after June 30, 2005, "hospital-attached nursing 20.35 facility" means a nursing facility which meets the requirements 20.36 of clauses (1) and (2), or (3) or (4): 21.1 (1) the nursing facility is recognized by the federal 21.2 Medicare program to be a hospital-based nursing facility; 21.3 (2) the hospital and nursing facility are physically 21.4 attached or connected by a corridor; 21.5 (3) a nursing facility and hospital, which have applied for 21.6 hospital-based nursing facility status under the federal 21.7 Medicare program during the reporting year, shall be considered 21.8 a hospital-attached nursing facility for purposes of setting 21.9 payment rates under this section. The nursing facility must 21.10 file its cost report for that reporting year using Medicare 21.11 principles and Medicare's recommended cost allocation methods 21.12 had the Medicare program's hospital-based nursing facility 21.13 status been granted to the nursing facility. For each 21.14 subsequent rate year, the nursing facility must meet the 21.15 definition requirements in clauses (1) and (2). If the nursing 21.16 facility is denied hospital-based nursing facility status under 21.17 the Medicare program, the nursing facility's payment rates for 21.18 the rate years the nursing facility was considered to be a 21.19 hospital-attached nursing facility according to this paragraph 21.20 shall be recalculated treating the nursing facility as a 21.21 non-hospital-attached nursing facility; 21.22 (4) if a nonprofit or community-operated hospital and 21.23 attached nursing facility suspend operation of the hospital, the 21.24 remaining nursing facility must be allowed to continue its 21.25 status as hospital-attached for rate calculations in the three 21.26 rate years subsequent to the one in which the hospital ceased 21.27 operations. 21.28 (b) The nursing facility's cost report filed as 21.29 hospital-attached facility shall use the same cost allocation 21.30 principles and methods used in the reports filed for the 21.31 Medicare program. Direct identification of costs to the nursing 21.32 facility cost center will be permitted only when the comparable 21.33 hospital costs have also been directly identified to a cost 21.34 center which is not allocated to the nursing facility. 21.35 Subd. 22. [HOUSEKEEPING COSTS.] "Housekeeping costs" means 21.36 the salaries and wages of the housekeeping supervisor, 22.1 housekeepers, and other cleaning employees and associated fringe 22.2 benefits and payroll taxes. It also includes the cost of 22.3 housekeeping supplies, including cleaning and lavatory supplies 22.4 and contract services. 22.5 Subd. 23. [LAUNDRY COSTS.] "Laundry costs" means the 22.6 salaries and wages of the laundry supervisor and other laundry 22.7 employees, associated fringe benefits, and payroll taxes. It 22.8 also includes the costs of linen and bedding, the laundering of 22.9 resident clothing, laundry supplies, and contract services. 22.10 Subd. 24. [LICENSEE.] "Licensee" means the individual or 22.11 organization listed on the form issued by the Minnesota 22.12 Department of Health under chapter 144A. 22.13 Subd. 25. [MAINTENANCE AND PLANT OPERATIONS 22.14 COSTS.] "Maintenance and plant operations costs" means the 22.15 salaries and wages of the maintenance supervisor, engineers, 22.16 heating-plant employees, and other maintenance employees and 22.17 associated fringe benefits and payroll taxes. It also includes 22.18 direct costs for maintenance and operation of the building and 22.19 grounds, including fuel, electricity, medical waste and garbage 22.20 removal, water, sewer, supplies, tools, and repairs. 22.21 Subd. 26. [METROPOLITAN STATISTICAL AREA OR MSA.] 22.22 "Metropolitan statistical area" or "MSA" means a regional area 22.23 as determined by the centers for Medicare and Medicaid services. 22.24 Subd. 27. [MOVABLE EQUIPMENT.] "Movable equipment" means 22.25 the direct cost to the nursing facility to purchase items listed 22.26 as major movable equipment in the depreciation guidelines and 22.27 technology. Technology, used directly for resident care, is 22.28 defined in section 144A.071, subdivision 1a, paragraph (j). 22.29 Subd. 28. [MULTIPLE BED ROOM.] "Multiple bed room" means a 22.30 room with two or more licensed beds that does not meet the 22.31 definition of a split-double bed room. 22.32 Subd. 29. [NORMALIZED DIRECT CARE COSTS.] "Normalized 22.33 direct care costs" means direct care costs divided by 22.34 standardized days. It is the costs for direct care services 22.35 associated with a RUGs index of 1.00. 22.36 Subd. 30. [NURSING COSTS.] "Nursing costs" means costs for 23.1 the wages of nursing administration, staff education, and direct 23.2 care registered nurses, licensed practical nurses, certified 23.3 nursing assistants, and trained medication aides; mental health 23.4 workers and other direct care employees, and associated fringe 23.5 benefits and payroll taxes; services from a supplemental nursing 23.6 services agency and supplies that are stocked at nursing 23.7 stations or on the floor and distributed or used individually, 23.8 including: alcohol, applicators, cotton balls, incontinence 23.9 pads, disposable ice bags, dressings, bandages, water pitchers, 23.10 tongue depressors, disposable gloves, enemas, enema equipment, 23.11 soap, medication cups, diapers, plastic waste bags, sanitary 23.12 products, thermometers, hypodermic needles and syringes, and 23.13 clinical reagents or similar diagnostic agents, and drugs which 23.14 are not paid on a separate fee schedule by the medical 23.15 assistance program or any other payer. 23.16 Subd. 31. [NURSING FACILITY.] "Nursing facility" means a 23.17 facility with a medical assistance provider agreement that is 23.18 licensed under chapter 144A or as a boarding care home under 23.19 sections 144.50 to 144.56. 23.20 Subd. 32. [OPERATING COSTS.] "Operating costs" means costs 23.21 associated with the direct care costs category and the support 23.22 services costs category. 23.23 Subd. 33. [PAYROLL TAXES.] "Payroll taxes" means the 23.24 employer's share of the FICA and Medicare withholding tax, and 23.25 state and federal unemployment compensation taxes. 23.26 Subd. 34. [PRIOR RATE-SETTING METHOD.] "Prior rate-setting 23.27 method" means the rate determination process in effect prior to 23.28 October 1, 2005, under Minnesota Rules and Minnesota Statutes. 23.29 Subd. 35. [PRIVATE BED ROOM.] "Private bed room" means a 23.30 room with one licensed bed that does not share access to the 23.31 corridor with another bed and has a toileting area that is not 23.32 shared with another bed. 23.33 Subd. 36. [PRIVATE PAYING RESIDENT.] "Private paying 23.34 resident" means a nursing facility resident who is not a medical 23.35 assistance recipient and whose payment rate is not established 23.36 by another third party, including the veterans administration or 24.1 Medicare. 24.2 Subd. 37. [PROPERTY-RELATED COSTS.] "Property-related 24.3 costs" means the cost of purchasing buildings, attached 24.4 fixtures, and land improvements used directly for resident 24.5 care. The costs of improvements to those assets after the date 24.6 of construction are called additional property-related costs. 24.7 Subd. 38. [QUALITY TIERS.] "Quality tiers" means groups of 24.8 facilities with quality scores within specified ranges. Tier 1 24.9 shall refer to facilities with scores in the lowest ten percent 24.10 of the maximum available quality points, and tier 10 shall refer 24.11 to facilities with scores in the highest ten percent of the 24.12 maximum available quality points. 24.13 Subd. 39. [RATE YEAR.] "Rate year" means the 12-month 24.14 period beginning on October 1 following the second most recent 24.15 reporting year. 24.16 Subd. 40. [RELATED ORGANIZATION.] "Related organization" 24.17 means a person that furnishes goods or services to a nursing 24.18 facility and that is a close relative of a nursing facility, an 24.19 affiliate of a nursing facility, a close relative of an 24.20 affiliate of a nursing facility, or an affiliate of a close 24.21 relative of an affiliate of a nursing facility. As used in this 24.22 subdivision, paragraphs (a) to (d) apply: 24.23 (a) "Affiliate" means a person that directly, or indirectly 24.24 through one or more intermediaries, controls or is controlled 24.25 by, or is under common control with another person. 24.26 (b) "Person" means an individual, a corporation, a 24.27 partnership, an association, a trust, an unincorporated 24.28 organization, or a government or political subdivision. 24.29 (c) "Close relative of an affiliate of a nursing facility" 24.30 means an individual whose relationship by blood, marriage, or 24.31 adoption to an individual who is an affiliate of a nursing 24.32 facility is no more remote than first cousin. 24.33 (d) "Control" including the terms "controlling," 24.34 "controlled by," and "under common control with" means the 24.35 possession, direct or indirect, of the power to direct or cause 24.36 the direction of the management, operations, or policies of a 25.1 person, whether through the ownership of voting securities, by 25.2 contract, or otherwise, or to influence in any manner other than 25.3 through an arms length, legal transaction. 25.4 Subd. 41. [REPORTING PERIOD.] "Reporting period" means the 25.5 one-year period beginning on October 1 and ending on the 25.6 following September 30 during which incurred costs are 25.7 accumulated and then reported on the statistical and cost report. 25.8 Subd. 42. [RESIDENT DAY OR ACTUAL RESIDENT DAY.] "Resident 25.9 day" or "actual resident day" means a day for which nursing 25.10 services are rendered and billable, or a day for which a bed is 25.11 held and billed. 25.12 Subd. 43. [SALARIES AND WAGES.] "Salaries and wages" means 25.13 amounts earned by and paid to employees or on behalf of 25.14 employees to compensate for necessary services provided. 25.15 Salaries and wages include accrued vested vacation and accrued 25.16 vested sick leave pay. Salaries and wages must be paid within 25.17 45 days of the end of the reporting period in order to be 25.18 allowable costs of the reporting period. 25.19 Subd. 44. [SINGLE BED ROOM.] "Single bed room" means a 25.20 room with one licensed bed that does not share access to the 25.21 corridor with another bed. 25.22 Subd. 45. [SOCIAL SERVICES COSTS.] "Social services costs" 25.23 means costs for the salaries and wages of the supervisor and 25.24 other social work employees, associated fringe benefits and 25.25 payroll taxes, supplies, services, and consultants. 25.26 Subd. 46. [SPLIT-DOUBLE BED ROOM.] "Split-double bed room" 25.27 means a room with two licensed beds that share access to the 25.28 corridor where there is a fixed, floor-to-ceiling partition 25.29 separating the two beds and each bed has its own window. 25.30 Subd. 47. [STAKEHOLDERS.] "Stakeholders" means individuals 25.31 and representatives of organizations interested in long-term 25.32 care, including nursing homes, consumers, and labor unions. 25.33 Subd. 48. [STANDARDIZED DAYS.] "Standardized days" means 25.34 the sum of resident days by case mix category multiplied by the 25.35 RUG index for each category. 25.36 Subd. 49. [STATISTICAL AND COST REPORT.] "Statistical and 26.1 cost report" means the forms supplied by the commissioner for 26.2 annual reporting of nursing facility expenses and statistics, 26.3 including instructions and definitions of items in the report. 26.4 Subd. 50. [SUPPORT SERVICES COSTS CATEGORY.] "Support 26.5 services costs category" means costs for dietary, housekeeping, 26.6 laundry, maintenance, and administration. 26.7 Subd. 51. [TARGET PRICES.] "Target prices" means the 26.8 measures of costs for the direct care cost category and for 26.9 support services costs category determined as a statistical 26.10 measure of per diem costs for groups of facilities. 26.11 Subd. 52. [UNADJUSTED FACILITY AGE.] "Unadjusted facility 26.12 age" means the age of the nursing facility before considering 26.13 additional property-related costs. 26.14 Subd. 53. [VALUE OF NEW CONSTRUCTION PUT IN PLACE.] "Value 26.15 of New Construction Put in Place" means the statistic published 26.16 by the federal Bureau of Labor Statistics. 26.17 Subd. 54. [REPORTING OF STATISTICAL AND COST 26.18 INFORMATION.] (a) Beginning January 15, 2005, all nursing 26.19 facilities shall provide information annually to the 26.20 commissioner on a form and in a manner determined by the 26.21 commissioner. The commissioner may also require nursing 26.22 facilities to provide statistical and cost information for a 26.23 subset of the items in the annual report on a semiannual basis. 26.24 Nursing facilities shall report only costs directly related to 26.25 the operation of the nursing facility. The facility shall not 26.26 include costs which are separately reimbursed by residents, 26.27 medical assistance, or other payors. Allocations of costs from 26.28 central, affiliated, or corporate office and related 26.29 organization transactions shall be reported according to section 26.30 256B.432. The commissioner may grant to facilities one 26.31 extension of up to 15 days for the filing of this report if the 26.32 extension is requested by December 15 and the commissioner 26.33 determines that the extension will not prevent the commissioner 26.34 from establishing rates in a timely manner required by law. The 26.35 commissioner may separately require facilities to submit in a 26.36 manner specified by the commissioner documentation of 27.1 statistical and cost information included in the report to 27.2 ensure accuracy in establishing payment rates and to perform 27.3 audit and appeal review functions under this section. 27.4 Facilities shall retain all records necessary to document 27.5 statistical and cost information on the report for a period of 27.6 no less than seven years. The commissioner may amend 27.7 information in the report according to subdivision 67. The 27.8 commissioner may reject a report filed by a nursing facility 27.9 under this section if the commissioner determines that the 27.10 report has been filed in a form that is incomplete or inaccurate 27.11 and the information is insufficient to establish accurate 27.12 payment rates. In the event that a report is rejected under 27.13 this subdivision or is not submitted in a timely manner, the 27.14 commissioner shall reduce the reimbursement rate to a nursing 27.15 facility to 85 percent of its most recently established rate 27.16 until the information is completely and accurately filed. The 27.17 reinstatement of the total reimbursement rate shall be 27.18 retroactive for no more than 90 days. 27.19 (b) Nursing facilities may, within 12 months of the due 27.20 date of a statistical and cost report, file an amendment when 27.21 errors or omissions in the annual statistical and cost report 27.22 are discovered and an amendment would result in a rate increase 27.23 of at least 20 cents per resident day in a case mix category 27.24 with a weight of 1.00 and shall, at any time, file an amendment 27.25 which would result in a rate reduction of at least 20 cents per 27.26 resident day in a case mix category with a weight of 1.00. The 27.27 commissioner shall make retroactive adjustments to the total 27.28 payment rate of a nursing facility if an amendment is accepted. 27.29 Where a retroactive adjustment is to be made as a result of an 27.30 amended report, audit findings, or other determination of an 27.31 incorrect payment rate, the commissioner may settle the payment 27.32 error through a negotiated agreement with the facility and a 27.33 gross adjustment of the payments to the facility. Retroactive 27.34 adjustments shall not be applied to private pay residents. An 27.35 error or omission for purposes of this item does not include a 27.36 nursing facility's determination that an election between 28.1 permissible alternatives was not advantageous and should be 28.2 changed. 28.3 (c) If the commissioner determines that a nursing facility 28.4 knowingly supplied inaccurate or false information or failed to 28.5 file an amendment to a statistical and cost report that resulted 28.6 in or would result in an overpayment, the commissioner shall 28.7 immediately adjust the nursing facility's payment rate and 28.8 recover the entire overpayment. The commissioner may also 28.9 terminate the commissioner's agreement with the nursing facility 28.10 and prosecute under applicable state or federal law. 28.11 Subd. 55. [CALCULATION OF DIRECT CARE PER DIEM COSTS.] The 28.12 commissioner shall calculate, for each nursing facility, the 28.13 normalized per diem cost for direct care services by dividing 28.14 the total allowable reported costs for direct care services by 28.15 the number of standardized days for the same reporting period. 28.16 The labor portion of this result is divided by the facility's 28.17 MSA wage index, and the quotient is added to the nonlabor 28.18 portion. 28.19 Subd. 56. [CALCULATION OF SUPPORT SERVICES PER DIEM 28.20 COSTS.] The commissioner shall calculate, for each nursing 28.21 facility, the per diem cost for support services by dividing the 28.22 total allowable reported costs for support services by the 28.23 number of resident days for the same reporting period. The 28.24 labor portion of this result is divided by the facility's MSA 28.25 wage index, and the quotient is added to the nonlabor portion. 28.26 Subd. 57. [CALCULATION OF A QUALITY SCORE.] The 28.27 commissioner shall determine a quality score for each nursing 28.28 facility using quality measures established in section 256B.439, 28.29 according to methods determined by the commissioner in 28.30 consultation with stakeholders and experts. These methods shall 28.31 be exempt from the rulemaking requirements under chapter 14. 28.32 For each quality measure, a score shall be determined with a 28.33 maximum number of points available and number of points assigned 28.34 as determined by the commissioner using the methodology 28.35 established according to this subdivision. The scores 28.36 determined for all quality measures shall be totaled. Ten 29.1 quality tiers shall be established in increments of ten percent 29.2 of the maximum available points. Quality scores shall be used 29.3 to assign facilities to quality tiers. The determination of the 29.4 quality measures to be used and the methods of calculating 29.5 scores may be revised annually by the commissioner. The 29.6 commissioner shall publish the methodology in the State Register 29.7 at least 15 months prior to the start of the rate year for which 29.8 the revised methodology is effective. The quality score used to 29.9 determine payment rates shall be established for a rate year 29.10 using data submitted in the statistical and cost report from the 29.11 associated reporting year, and using data from other sources 29.12 related to the reporting year. 29.13 Subd. 58. [CALCULATION OF TARGET PRICES.] Annually, the 29.14 commissioner shall calculate target prices to be associated with 29.15 each quality tier for direct care and for support services costs. 29.16 (a) The costs calculated in subdivisions 55 and 56 shall be 29.17 arranged from lowest to highest. The commissioner shall include 29.18 in the array all facilities that have filed a complete 29.19 statistical and cost report within eight weeks of the date 29.20 specified under subdivision 54. Amendments and audit 29.21 corrections shall not be incorporated into the costs in the 29.22 array. 29.23 (b) For each operating cost category, the target price for 29.24 the quality tier associated with the facility with the highest 29.25 quality score shall be the per diem costs of the facility with 29.26 costs of the 70th percentile multiplied by the budget factor in 29.27 paragraph (d). 29.28 (c) For each operating cost category, the target price for 29.29 the quality tier associated with the facility with the lowest 29.30 quality score shall be the per diem costs of the facility with 29.31 costs at the 30th percentile multiplied by the budget factor in 29.32 paragraph (d). 29.33 (d) For the rate year beginning on October 1, 2005, the 29.34 budget neutrality factor to be used in paragraphs (b) and (c), 29.35 shall be a percentage amount that will result in an average per 29.36 diem rate $1.03 less than the case mix and MSA normalized 30.1 medical assistance average charge per resident day used to 30.2 determine the nursing facility forecast published in February 30.3 2005 for the 2006 state fiscal year. The case mix normalized 30.4 medical assistance (MA) average charge per resident day shall be 30.5 equal to the average MA payment per day, plus the average MA 30.6 recipient contribution per day, divided by the average MA RUGs 30.7 weight. The same percentage amount shall be used each year as 30.8 in the previous year, except that in the event that the 30.9 commissioner publishes a new methodology under subdivision 57, 30.10 the commissioner may increase the percentile referenced in 30.11 paragraph (b) by as much as five percentile points and shall 30.12 reduce the percentile referenced in paragraph (c) by an equal 30.13 amount, and a new budget neutrality factor shall be determined. 30.14 This new budget neutrality factor shall be the percentage amount 30.15 that will result in an average per diem rate equal to the 30.16 average per diem used to determine the most recently published 30.17 nursing facility forecast. In no event shall the percentile 30.18 amount in paragraph (b) exceed the 90th percentile. The same 30.19 budget neutrality factor shall be used for all three groups of 30.20 facilities in paragraph (f). 30.21 (e) The target prices for the remaining quality tiers shall 30.22 be calculated by using a straight line interpolation from the 30.23 target prices determined in paragraphs (b) and (c). 30.24 (f) The calculations in paragraphs (a) to (c) and (e) shall 30.25 be performed separately for three groups of facilities in 30.26 clauses (1) to (3) to establish different target prices for each 30.27 group for direct care costs: 30.28 (1) facilities that have three or more admissions per bed 30.29 per year, are hospital attached, or are licensed under Minnesota 30.30 Rules, parts 9570.2000 to 9570.3600; 30.31 (2) facilities that have more than 50 percent of their beds 30.32 licensed as boarding care homes; and 30.33 (3) all other facilities. 30.34 (g) For facilities with both nursing home and boarding care 30.35 home licensed beds, the target price shall be the average of the 30.36 target prices under paragraph (f), clause (1), (2), or (3), 31.1 weighted for the number of beds of each type. 31.2 Subd. 59. [CALCULATION OF UNINFLATED PAYMENT RATES FOR 31.3 OPERATING COSTS.] The commissioner shall determine the 31.4 uninflated payment rates for direct care costs and for support 31.5 services costs for each facility according to paragraphs (a) to 31.6 (j). 31.7 (a) For direct care costs, determine the lesser of the 31.8 target price for the quality tier assigned to the facility or 31.9 the per diem costs in subdivision 55. 31.10 (b) Determine the difference between the two amounts in 31.11 paragraph (a). 31.12 (c) For direct care costs, for facilities with costs 31.13 greater than the target price, determine the portion of the 31.14 difference determined in paragraph (b) to be included in the 31.15 payment rate with this table: 31.16 For The rate shall include this portion 31.17 Quality of differences of: 31.18 Tier $0-5 5.01-10 10.01-15 15.01-20 20.01-25 25.01-35 31.19 1 0% 0% 0% 0% 0% 0% 31.20 2 0% 0% 0% 0% 0% 0% 31.21 3 20% 0% 0% 0% 0% 0% 31.22 4 40% 20% 0% 0% 0% 0% 31.23 5 70% 50% 20% 0% 0% 0% 31.24 6 100% 70% 40% 20% 0% 0% 31.25 7 105% 70% 50% 30% 10% 0% 31.26 8 110% 90% 70% 50% 30% 10% 31.27 9 110% 100% 90% 60% 40% 20% 31.28 10 120% 100% 100% 80% 50% 30% 31.29 (d) For direct care costs, for facilities with costs less 31.30 than the target price, determine the portion of the difference 31.31 determined in paragraph (b) to be included in the payment rate 31.32 with this table: 31.33 For The rate shall include this portion 31.34 Quality of differences of: 31.35 Tier $0-5 5.01-10 >$10 31.36 1 10% 0% 0% 32.1 2 10% 0% 0% 32.2 3 20% 10% 0% 32.3 4 30% 15% 0% 32.4 5 50% 25% 0% 32.5 6 50% 25% 0% 32.6 7 60% 30% 0% 32.7 8 80% 40% 0% 32.8 9 90% 45% 0% 32.9 10 100% 50% 0% 32.10 (e) The payment rate for direct care costs shall be the 32.11 amount determined in paragraph (a) plus the amount determined in 32.12 either paragraph (c) or (d). 32.13 (f) For support services costs, determine the lesser of the 32.14 target price for the quality tier assigned to the facility or 32.15 the per diem costs in subdivision 56. 32.16 (g) Determine the difference between the two amounts in 32.17 paragraph (f). 32.18 (h) For support services costs, for facilities with costs 32.19 greater than the target price, determine the portion of the 32.20 difference determined in paragraph (g) to be included in the 32.21 payment rate with this table: 32.22 For The rate shall include this portion 32.23 Quality of differences of: 32.24 Tier $0-2 2.01-4 4.01-6 6.01-8 8.01-10 >$10 32.25 1 0% 0% 0% 0% 0% 0% 32.26 2 0% 0% 0% 0% 0% 0% 32.27 3 20% 0% 0% 0% 0% 0% 32.28 4 40% 20% 0% 0% 0% 0% 32.29 5 70% 50% 20% 0% 0% 0% 32.30 6 100% 70% 40% 20% 0% 0% 32.31 7 105% 70% 50% 30% 10% 0% 32.32 8 110% 90% 70% 50% 30% 10% 32.33 9 110% 100% 90% 60% 40% 20% 32.34 10 120% 100% 100% 80% 50% 30% 32.35 (i) For support services costs, for facilities with costs 32.36 less than the target price, determine the portion of the 33.1 difference determined in paragraph (g) to be included in the 33.2 payment rate with this table: 33.3 For The rate shall include this portion 33.4 Quality of differences of: 33.5 Tier $0-2 2.01-4 >$4 33.6 1 10% 0% 0% 33.7 2 10% 0% 0% 33.8 3 20% 10% 0% 33.9 4 30% 15% 0% 33.10 5 50% 25% 0% 33.11 6 50% 25% 0% 33.12 7 60% 30% 0% 33.13 8 80% 40% 0% 33.14 9 90% 45% 0% 33.15 10 100% 50% 0% 33.16 (j) The payment rate for support services costs shall be 33.17 the amount determined in paragraph (f) plus the amount 33.18 determined in either paragraph (h) or (i). 33.19 Subd. 60. [GEOGRAPHIC ADJUSTMENTS.] The commissioner shall 33.20 determine the labor-related share of the operating rate in 33.21 accordance with the labor-related share statistics published by 33.22 the Center for Medicare and Medicaid Services in the Federal 33.23 Register effective on the October 1 prior to the start of the 33.24 year for which rates are established. The commissioner shall 33.25 multiply the labor-related share of the operating rate by the 33.26 wage index published by the Center for Medicare and Medicaid 33.27 Services in the Federal Register effective on the October 1 33.28 prior to the start of the year for which rates are established. 33.29 Subd. 61. [ADJUSTER FOR OPERATING PAYMENT RATES.] The 33.30 commissioner shall provide information to the appropriate 33.31 committee chairs of the legislature by January 15 of 33.32 odd-numbered years specifying adjusters that may be multiplied 33.33 by the uninflated payment rates, by the target prices, or by any 33.34 other factor the commissioner deems appropriate, for case mix 33.35 adjusted and support care service costs determined in 33.36 subdivision 59. The information shall include: 34.1 (1) projected change in the CPI-U, between the midpoint of 34.2 the reporting years and the midpoint of the rate years, as 34.3 determined by the national economic consultant used by the 34.4 commissioner of finance, for the years in the next biennium; 34.5 (2) the costs or savings to the state of using any factor 34.6 other than 100 percent; and 34.7 (3) the commissioner may also describe other factors that 34.8 the commissioner recommends for establishing the adjuster. 34.9 Subd. 62. [CALCULATION OF PAYMENT RATE FOR EXTERNAL FIXED 34.10 COSTS.] The commissioner shall calculate a payment rate for 34.11 external fixed costs. 34.12 (a) For facilities licensed as nursing homes, the portion 34.13 related to section 256.9657 shall be equal to $8.86. For 34.14 facilities licensed as both nursing homes and boarding care 34.15 homes, the portion related to section 256.9657 shall be equal to 34.16 $8.86 multiplied by the ratio of their number of nursing home 34.17 beds divided by their total number of licensed beds. 34.18 (b) The portion related to the licensure fee under section 34.19 144.122, paragraph (d), shall be the amount of the fee divided 34.20 by actual resident days. 34.21 (c) The portion related to scholarships shall be determined 34.22 under section 256B.431, subdivision 36. 34.23 (d) The portion related to long-term care consultation 34.24 shall be determined according to section 256B.0911, subdivision 34.25 6. 34.26 (e) The portion related to development and education of 34.27 resident and family advisory councils under section 144A.33 34.28 shall be $5 divided by 365. 34.29 (f) The portion related to planned closure rate adjustments 34.30 shall be as determined under section 256B.437, subdivision 6. 34.31 (g) The portions related to property insurance, real estate 34.32 taxes, special assessments, and payments made in lieu of real 34.33 estate taxes directly identified or allocated to the nursing 34.34 facility shall be the actual amounts divided by actual resident 34.35 days. 34.36 (h) The portion related to the provision of movable 35.1 equipment shall be an equipment allowance. Each facility shall 35.2 report the cumulative purchase price of all movable equipment in 35.3 active use in the facility. This amount shall be divided by the 35.4 product of ten, 365, and the number of licensed beds not in 35.5 layaway in the facility on the last day of the reporting 35.6 period. These values shall be arrayed and the median 35.7 determined. The equipment allowance shall be this value 35.8 multiplied by the property budget neutrality factor determined 35.9 in subdivision 63, paragraph (g), clause (6). 35.10 (i) The portion related to PERA shall be actual costs 35.11 divided by resident days. 35.12 (j) The payment rate for external fixed costs shall be the 35.13 sum of the amounts in paragraphs (a) to (i). 35.14 Subd. 63. [CALCULATION OF PAYMENT RATE FOR 35.15 PROPERTY-RELATED COSTS.] The commissioner shall calculate a 35.16 payment rate for property-related costs according to paragraphs 35.17 (a) to (h). 35.18 (a) Determine common rental value per bed. The 35.19 commissioner shall determine a common rental value that will be 35.20 used by all facilities. The common rental value for the rate 35.21 year beginning on October 1, 2005, will be computed based upon 35.22 the replacement cost new per bed limit in effect at the end of 35.23 the reporting year for multiple-bed rooms as found in section 35.24 256B.431, subdivision 17, paragraph (g). In subsequent rate 35.25 years, the multiple-bed replacement cost new limit will be 35.26 adjusted annually by the percentage change in the Bureau of the 35.27 Census: Composite fixed-weighted price index as published in 35.28 the C30 Report, Value of New Construction Put in Place. 35.29 The equipment allowance determined under subdivision 62, 35.30 paragraph (h), shall be multiplied by 365 and by ten. This 35.31 amount shall be deducted from the multiple-bed replacement cost 35.32 new limit to determine the common rental value. 35.33 (b) Compute each facility's specific rental value per bed. 35.34 Each nursing facility's specific rental value shall equal the 35.35 common rental value multiplied by its space adjuster, location 35.36 adjuster, split-double bed room adjuster, and age adjuster as 36.1 described in paragraphs (c), (d), (e), and (f). 36.2 (c) Space adjuster. Each nursing facility shall have a 36.3 space adjuster computed that will be used to convert the common 36.4 rental value to its facility specific rental value. A 36.5 facility's square footage of space used for the operation of the 36.6 nursing facility shall be divided by the number of its active 36.7 beds. Each of these values shall be arrayed from lowest to 36.8 highest and the median value determined. The space adjuster is 36.9 one-fourth of the sum of the number three plus the quotient of 36.10 the facility's square footage per active bed divided by the 36.11 median square footage per active bed. The minimum adjuster 36.12 shall be 0.85 and the maximum adjuster shall be 1.15. 36.13 (d) Location adjuster. Each nursing facility shall have a 36.14 location adjuster assigned that will be used to convert the 36.15 common rental value to its facility specific rental value. The 36.16 location adjuster shall be the value published by RS Means and 36.17 assigned to each Metropolitan Statistical Area (MSA) published 36.18 by CMS and used for the Medicare prospective payment system for 36.19 skilled nursing facilities. The RS Means location factor is 36.20 assigned to each MSA as follows: 36.21 MSA Region RS Means Applies to the counties of 36.22 Location Adjuster 36.23 2240 1.033 St. Louis 36.24 2520 0.983 Clay 36.25 2985 0.940 Polk, Red Lake 36.26 3870 1.021 Houston 36.27 5120 1.124 Anoka, Carver, Chisago, 36.28 Dakota, Hennepin, Isanti, 36.29 Ramsey, Scott, Sherburne, 36.30 Washington, Wright 36.31 6820 1.021 Olmsted 36.32 6980 1.054 Benton, Stearns 36.33 Rural 0.960 All other counties not 36.34 listed above 36.35 (e) Split-double bed room adjuster. Each nursing facility 36.36 shall have a split-double bed room adjuster computed that will 37.1 be used to convert the common rental value to its facility 37.2 specific rental value. The amount for a facility shall be the 37.3 number one plus the quotient of the number of active beds in 37.4 split-double bed rooms divided by four times the number of total 37.5 active beds. 37.6 (f) Age adjuster. Each nursing facility shall have an age 37.7 adjuster computed that will be used to convert the common rental 37.8 value to its facility specific rental value. A facility's age 37.9 shall be the number of days between the date of completion of 37.10 construction and the beginning of the rate year divided by 37.11 365.25 rounded to the nearest tenth. 37.12 (1) For facilities that have been sold since completion of 37.13 construction, if the licensee reports that the date of 37.14 completion of construction is unknown, and the commissioner 37.15 agrees the date is unknown, the most recent purchase date of the 37.16 facility shall be used to determine the presumed age as follows: 37.17 (i) the purchase price of the facility will be reduced by 37.18 20 percent to account for movable equipment, technology, and the 37.19 business operations; 37.20 (ii) the adjusted purchase price in item (i) shall be 37.21 divided by the number of active beds; 37.22 (iii) the common rental value computed in paragraph (a) 37.23 will be indexed backward from the beginning of the rate year to 37.24 the date of the facility's purchase using the indices described 37.25 in paragraph (a); 37.26 (iv) multiply the facility's location adjuster in paragraph 37.27 (d) by its space adjuster in paragraph (c); 37.28 (v) the adjusted purchase price per active bed in item (ii) 37.29 shall be divided by the product of the location adjuster and 37.30 space adjuster in item (iv); 37.31 (vi) divide the value in item (v) by the indexed common 37.32 rental value in item (iii); 37.33 (vii) the value in item (vi) is subtracted from 1.0; 37.34 (viii) the age at the time of purchase shall be the value 37.35 in item (vii) divided by 0.015; and 37.36 (ix) the age as of the beginning of the rate year shall be 38.1 the value computed in item (viii) plus the quotient of the 38.2 number of days between the date of purchase and the start of the 38.3 rate year divided by 365.25. 38.4 (2) For facilities that are used by the current licensee, 38.5 under an operating leasee according to generally accepted 38.6 accounting principles, and for which the licensee reports that 38.7 the date of completion of construction is unknown and that the 38.8 most recent date and price of sale is also unknown, and the 38.9 commissioner agrees that these facts are unknown, the presumed 38.10 age shall be computed as follows: 38.11 (i) compute the present value of the minimum lease payments 38.12 according to generally accepted accounting principles using an 38.13 interest rate equal to the ten-year United States Treasury Bond 38.14 rate plus two percent and a term of 20 years; 38.15 (ii) the present value in item (i) shall be reduced by ten 38.16 percent to account for movable equipment and technology; 38.17 (iii) the adjusted present value in item (ii) shall be 38.18 divided by the number of active beds; 38.19 (iv) the common rental value computed in paragraph (a) will 38.20 be indexed backward from the beginning of the rate year to the 38.21 date of the facility's lease using the indices described in 38.22 paragraph (a); 38.23 (v) multiply the facility's location adjuster by its space 38.24 adjuster; 38.25 (vi) the adjusted present value per active bed in item (iii) 38.26 shall be divided by the product of the location adjuster and 38.27 space adjuster in item (v); 38.28 (vii) divide the value in item (vi) by the indexed common 38.29 rental value in item (iv); 38.30 (viii) the value in item (vii) is subtracted from 1.0; 38.31 (ix) the age at the time of the inception of the lease 38.32 shall be the value in item (viii) divided by 0.015; and 38.33 (x) the age as of the beginning of the rate year shall be 38.34 the value computed in item (ix) plus the quotient of the number 38.35 of days between the date of lease inception and the start of the 38.36 rate year divided by 365.25. 39.1 (3) For the rate year beginning on October 1, 2005, the age 39.2 of the facility shall be adjusted for the value of 39.3 property-related costs added since the date of construction, 39.4 purchase, or lease to determine the effective age. The 39.5 additions allowed in this calculation will be those recognized 39.6 as improvements, and not as repairs, under generally accepted 39.7 accounting principles. The effective age shall be computed as 39.8 follows: 39.9 (i) the depreciated portion of the facility shall be 39.10 computed as the common rental value multiplied by the facility's 39.11 space adjuster, location adjuster, split-double bed room 39.12 adjuster, and the product of the unadjusted facility age 39.13 computed in this paragraph and 0.015; 39.14 (ii) the allowable additional property-related costs that 39.15 were purchased between the date of construction, purchase, or 39.16 lease and October 1, 2005, shall be the costs divided by two; 39.17 (iii) the allowable additions are divided by the value in 39.18 item (i) and rounded to the nearest whole number; 39.19 (iv) the number of active beds are reduced by the value in 39.20 item (iii). If this results in a value that is less than zero, 39.21 use zero; 39.22 (v) the value in item (iv) is multiplied by the unadjusted 39.23 facility age; and 39.24 (vi) the effective age is the value in item (v) divided by 39.25 the number of active beds. 39.26 (4) For years beginning on or after October 1, 2006, the 39.27 facility's age can be adjusted for additional property-related 39.28 costs incurred during the rate year using the method for the 39.29 rate year beginning on October 1, 2005, in clause (3), items (i) 39.30 to (vi). If a facility's age has been adjusted in a prior rate 39.31 year, the unadjusted facility age referred to in clause (3), 39.32 item (i), is the age produced by clause (3), items (i) to (vi), 39.33 in the prior rate year. The allowable additions in clause (3), 39.34 item (ii), are the property-related costs incurred during the 39.35 reporting year. 39.36 The age adjuster shall be the number one minus the product 40.1 of the effective age and 0.015. The age adjuster cannot be less 40.2 than 0.4. 40.3 (g) Compute the property-related rate. The 40.4 property-related payment rate for a facility is computed as: 40.5 (1) an interest rate shall be computed that is the mean of 40.6 the United States Treasury Bond Ten-Year Rates for the most 40.7 recent 12 quarters ending with the July 1 date immediately 40.8 preceding the beginning of the rate year. The rates to be used 40.9 are those published on the first business day of each quarter; 40.10 (2) the amount in clause (1) shall be increased by two 40.11 percent; 40.12 (3) a facility's specific rental value shall be multiplied 40.13 by the value in clause (2); 40.14 (4) a divisor for all facilities will be 365 multiplied by 40.15 0.95; 40.16 (5) the value in clause (3) divided by the value in clause 40.17 (4); and 40.18 (6) the property-related rate shall be the value in clause 40.19 (5) multiplied by a property budget neutrality factor. The 40.20 budget neutrality factor equals the median property payment rate 40.21 under the prior setting method for October 1, 2005, divided by 40.22 the median of the values in clause (5) plus the equipment 40.23 allowance in subdivision 62, paragraph (h), for October 1, 2005. 40.24 This budget neutrality factor shall be used in subsequent years. 40.25 (h) Private bed room and single bed room payment adjustment. 40.26 The commissioner shall allow a private bed room payment rate by 40.27 increasing the property-related rate computed in paragraph (g) 40.28 by 1.65 for a medical assistance recipient in a private bed 40.29 room. The commissioner shall allow a single bed room payment 40.30 rate by increasing the property-related rate computed in 40.31 paragraph (g) by 1.35 for a medical assistance recipient in a 40.32 single bed room. Rates charged to private-paying residents in 40.33 private bed or single bed rooms are not limited. 40.34 (i) Additions to property-related costs during the phase-in 40.35 period. If a facility makes additions to property-related costs 40.36 during the period October 1, 2005, to September 30, 2007, the 41.1 commissioner will compute the change to the property-related 41.2 rate as described in paragraph (f). Notwithstanding the 41.3 requirements of the rate-setting method for property-related 41.4 costs in Minnesota Rules and Minnesota Statutes, the amount of 41.5 the rate change computed in paragraph (f) shall be recognized as 41.6 an additional rate change under the prior rate-setting method 41.7 for the calculation of rates in subdivision 65, paragraph (c). 41.8 Subd. 64. [CALCULATION OF TOTAL PAYMENT RATE.] The 41.9 commissioner shall calculate the total payment rate by adding 41.10 together the payment rates determined in subdivisions 61, 62, 41.11 and 63. 41.12 Subd. 65. [PHASE-IN.] The commissioner shall implement the 41.13 rate-setting methods in this section according to paragraphs (a) 41.14 to (j). 41.15 (a) Rates effective on June 30, 2005, shall remain in 41.16 effect through September 30, 2005. 41.17 (b) By August 15 of 2005, 2006, and 2007, the commissioner 41.18 shall notify nursing facilities of the rates they will receive 41.19 under both this section and under the prior rate-setting method, 41.20 and of the actual rates that will apply based on a blending of 41.21 these two rate sets. 41.22 (c) For purposes of determining payment rates under the 41.23 prior rate-setting method, for rate years beginning after June 41.24 30, 2005, the rate adjustment under section 256B.434, 41.25 subdivision 4, paragraph (c), shall apply only to the 41.26 property-related payment rate, and this method shall be used for 41.27 computing property payment rates under the prior rate-setting 41.28 method for all facilities. 41.29 (d) For rate years beginning October 1 of 2005, 2006, and 41.30 2007, for operating payment rate components under the prior 41.31 rate-setting method, the commissioner shall use the amounts in 41.32 effect on June 30, 2005. 41.33 (e) Notwithstanding the requirements of the prior 41.34 rate-setting method, facilities with property-related rates 41.35 computed under Minnesota Rules, parts 9549.0010 to 9549.0080 for 41.36 the rate year beginning on July 1, 2004, will have the equity 42.1 incentive under section 256B.431, subdivision 16, the 42.2 refinancing incentive under section 256B.431, subdivision 19, 42.3 and the capital repairs and replacements rate under section 42.4 256B.431, subdivision 15, held constant until September 30, 2008. 42.5 (f) For the determination of the rate under the prior 42.6 rate-setting method, the real estate and special assessments 42.7 payment rate will be computed as described under sections 42.8 256B.431, subdivision 2b, paragraph (g), and 256B.0911, 42.9 subdivision 6. 42.10 (g) The actual total payment rate that will apply on 42.11 October 1, 2005, shall consist of ten percent of the amount 42.12 determined under this section and 90 percent of the amount 42.13 determined under the prior rate-setting method. 42.14 (h) The actual total payment rate that will apply on 42.15 October 1, 2006, shall consist of 40 percent of the amount 42.16 determined under this section and 60 percent of the amount 42.17 determined under the prior rate-setting method. 42.18 (i) The actual total payment rate that will apply on 42.19 October 1, 2007, shall consist of 70 percent of the amount 42.20 determined under this section and 30 percent of the amount 42.21 determined under the prior rate-setting method. 42.22 (j) The actual total payment rate that will apply on 42.23 October 1, 2008, shall be the amount determined under this 42.24 section. 42.25 (k) The additional payment for a private bed room or a 42.26 single bed room allowed in subdivision 63, paragraph (h), shall 42.27 be added to the amounts determined under this section and the 42.28 prior rate-setting method. 42.29 Subd. 66. [EXCEPTION ALLOWING CONTRACTING FOR SPECIALIZED 42.30 CARE.] (a) The commissioner shall publish a request for 42.31 proposals annually, and may negotiate operating payment rates 42.32 with up to 2.5 percent of nursing facilities, that provide 42.33 specialized care. Rate negotiations must be based on costs. In 42.34 selecting facilities to negotiate with, the commissioner shall 42.35 consider the following criteria: 42.36 (1) the facility should have a high quality score; 43.1 (2) the facility should have high direct care per diem 43.2 costs; 43.3 (3) the facility must serve residents with diagnoses or 43.4 other circumstances that require care costing more than normal 43.5 in a nursing home setting; and 43.6 (4) the facility must provide a specialized program or 43.7 programs to meet the needs of these individuals and serve a 43.8 large portion of the individuals residing in the facility. 43.9 (b) Negotiated rate adjustments shall not exceed 50 percent 43.10 of the direct care portion of the payment rate associated with 43.11 the RUGs group with the highest index, that would otherwise be 43.12 established under this section. Negotiated rates shall apply to 43.13 the entire facility. The commissioner may negotiate rates that 43.14 will apply for either one or two years. Facilities with 43.15 negotiated rates under this subdivision shall not be included in 43.16 determining target prices under subdivision 58. 43.17 Subd. 67. [AUDIT AUTHORITY.] (a) The commissioner may 43.18 subject reports and supporting documentation to desk and field 43.19 audits to determine compliance with this section. Retroactive 43.20 adjustments shall be made as a result of desk or field audit 43.21 findings if the cumulative impact of the finding would result in 43.22 a rate adjustment of at least 20 cents per resident day in a 43.23 case mix category with a weight of 1.00. If a field audit 43.24 reveals inadequacies in a nursing facility's record keeping or 43.25 accounting practices, the commissioner may require the nursing 43.26 facility to engage competent professional assistance to correct 43.27 those inadequacies within 90 days so that the field audit may 43.28 proceed. 43.29 (b) Field audits may cover the four most recent annual 43.30 statistical and cost reports for which desk audits have been 43.31 completed and payment rates have been established. The field 43.32 audit must be an independent review of the nursing facility's 43.33 statistical and cost report. All transactions, invoices, or 43.34 other documentation that support or relate to the statistics and 43.35 costs claimed on the annual statistical and cost reports are 43.36 subject to review by the field auditor. If the provider fails 44.1 to provide the field auditor access to supporting documentation 44.2 related to the information reported on the statistical and cost 44.3 report within the time period specified by the commissioner, the 44.4 commissioner shall either calculate the total payment rate by 44.5 disallowing the cost of the items for which access to the 44.6 supporting documentation is not provided or applying the 44.7 provider's reimbursement rate reduction in subdivision 54, 44.8 whichever would result in the least amount of change in the 44.9 total payment rate. 44.10 (c) Changes in the total payment rate which result from 44.11 desk or field audit adjustments to statistical and cost reports 44.12 for reporting years earlier than the four most recent annual 44.13 cost reports must be made to the four most recent annual 44.14 statistical and cost reports, the current statistical and cost 44.15 report, and future statistical and cost reports to the extent 44.16 that those adjustments affect the total payment rate established 44.17 by those reporting years. 44.18 (d) The commissioner shall extend the period for retention 44.19 of records under subdivision 54 for purposes of performing field 44.20 audits as necessary to enforce section 256B.48 with written 44.21 notice to the facility postmarked no later than 90 days prior to 44.22 the expiration of the record retention requirement. 44.23 Subd. 68. [REMEDIES FOR DISPUTES.] The commissioner shall 44.24 provide remedies for disputes under this section. 44.25 (a) A provider may appeal a determination of a payment rate 44.26 established under this section if the appeal, if successful, 44.27 would result in a change to the provider's payment rate. 44.28 Appeals must be filed according to procedures in this 44.29 subdivision. 44.30 (b) To appeal, the provider shall file with the 44.31 commissioner a written notice of appeal and the appeal must be 44.32 postmarked or received by the commissioner within 60 days of the 44.33 date the determination of the payment rate was mailed or 44.34 personally received by a provider, whichever is earlier. 44.35 (c) The notice of appeal must specify: 44.36 (1) each disputed item; 45.1 (2) the reason for the dispute; 45.2 (3) the computation that the provider believes is correct; 45.3 (4) the authority in statute or rule upon which the 45.4 provider relies for each disputed item; 45.5 (5) the name and address of the person or firm with whom 45.6 contacts may be made regarding the appeal; and 45.7 (6) additional information the provider wishes to offer 45.8 with the appeal to support the provider's position. The 45.9 commissioner may request additional information to clarify the 45.10 provider's position. 45.11 (d) The commissioner shall review appeals and issue a 45.12 written appeal determination on each appealed item within 180 45.13 days of the due date of the appeal. Upon mutual agreement, the 45.14 commissioner and the provider may extend the time for issuing a 45.15 determination for a specified period. The appeal determination 45.16 takes effect 30 days following the date of issuance specified in 45.17 the determination. 45.18 (e) For an appeal item on which the provider disagrees with 45.19 the appeal determination, the provider may request 45.20 reconsideration. A request for reconsideration must be 45.21 postmarked or received by the commissioner within 30 days of the 45.22 date of issuance of the determination. A request for 45.23 reconsideration delays the date on which the determination takes 45.24 effect. The appeal determination and any changes resulting from 45.25 reconsideration will become effective 30 days following the 45.26 issuance of the reconsideration response. 45.27 (f) For an appeal item on which the provider disagrees with 45.28 the appeal determination and the reconsideration response, if 45.29 any, the provider may file with the commissioner a written 45.30 demand for a contested case hearing to determine the proper 45.31 resolution of specified appeal items. The demand must be 45.32 postmarked or received by the commissioner within 30 days of the 45.33 date of issuance specified in the determination or within 30 45.34 days of the issuance of the reconsideration response, if 45.35 reconsideration was requested. A demand for a contested case 45.36 hearing for an appeal item nullifies the written appeal 46.1 determination issued by the commissioner for that appeal item. 46.2 The commissioner shall refer any demand for a contested case 46.3 hearing to the Office of the Attorney General. 46.4 (g) A contested case hearing shall be heard by an 46.5 administrative law judge according to sections 14.48 to 14.56. 46.6 In any proceeding under this section, the appealing party must 46.7 demonstrate by a preponderance of the evidence that the 46.8 determination of a payment rate is incorrect. 46.9 (h) Regardless of any rate appeal, the rate established 46.10 must be the rate paid and must remain in effect until final 46.11 resolution of the appeal or a subsequent rate determination. 46.12 (i) A provider shall not use this process to challenge the 46.13 method of determining a quality score under subdivision 57; the 46.14 calculation of target prices under subdivision 58; the 46.15 application of an adjuster determined according to subdivision 46.16 61; the determination of the weighted median square feet per bed 46.17 under subdivision 63; or the commissioner's determination under 46.18 subdivision 66 or 69 to negotiate rates. This process does not 46.19 apply to a request from a resident or nursing facility for 46.20 reconsideration of the classification of a resident under 46.21 section 144.0722 or 144.0724. 46.22 (j) Target prices must not be recalculated to reflect 46.23 changes to cost or statistical data resulting from an appeal 46.24 resolution. 46.25 Subd. 69. [INTERIM RATES.] (a) The commissioner shall 46.26 determine interim payment rates for nursing facilities that have 46.27 no cost history. The facilities shall provide statistical and 46.28 cost information, according to subdivision 54, on a prospective 46.29 basis. The commissioner shall establish an interim rate using 46.30 the quality tier of the nursing facility with a quality score at 46.31 the 60th percentile, costs according to a budget negotiated with 46.32 the provider, and the methods provided in subdivisions 59, 62, 46.33 and 63. The interim rate shall apply until a rate can be 46.34 established under this section. Upon providing final 46.35 information under subdivision 54 for the interim rate period, 46.36 the commissioner shall determine that an overpayment has 47.1 occurred if per diem costs for total operating cost categories 47.2 were less than budgeted by an amount greater than four percent, 47.3 and shall recover any overpayment subject to the following 47.4 limitations: 47.5 (1) based upon the actual quality score, the commissioner 47.6 shall adjust the quality tier to be used, but may not reduce the 47.7 quality tier by more than one level; 47.8 (2) in establishing the final rate for the interim period, 47.9 the commissioner shall use target prices as provided under 47.10 subdivision 58; and 47.11 (3) in the event of an overpayment, the commissioner may 47.12 allow up to six months for complete repayment if the provider 47.13 demonstrates that immediate repayment of the overpayment would 47.14 result in an undue hardship to the operation of the facility. 47.15 (b) The commissioner may negotiate an interim rate with a 47.16 nursing facility, according to the process in paragraph (a), 47.17 when that facility has been purchased by an unrelated party 47.18 within the last six months. In determining if negotiations 47.19 shall be initiated, the commissioner shall consider: 47.20 (1) the potential inadequacy of current rates as evidenced 47.21 by the position in the arrays of operating costs of the rates of 47.22 the requesting facility; 47.23 (2) preventing closure of facilities in under-bedded areas 47.24 of the state, as measured by the number of beds per 1,000 47.25 elderly in the county or in contiguous counties in which the 47.26 facility is located; 47.27 (3) the ability of the purchaser to provide high quality 47.28 services as evidenced by high quality scores of any other 47.29 facility under the control of the purchaser operating in 47.30 Minnesota; 47.31 (4) the ability of the purchasing entity to operate 47.32 efficiently as evidenced by the difference between the operating 47.33 costs and target prices of the other facility or facilities 47.34 under the control of the purchaser operating in Minnesota; 47.35 (5) previous success of the purchaser with negotiated 47.36 interim rates; 48.1 (6) the financial soundness of the purchaser; 48.2 (7) avoiding negotiating interim rates with purchasers who 48.3 have sold facilities that then requested interim rate 48.4 negotiation; and 48.5 (8) avoiding too much consolidation of the nursing facility 48.6 industry within any small number of providers. 48.7 Sec. 16. Minnesota Statutes 2003 Supplement, section 48.8 256B.47, subdivision 2, is amended to read: 48.9 Subd. 2. [NOTICE TO RESIDENTS.] (a) No increase in nursing 48.10 facility rates for private paying residents shall be effective 48.11 unless the nursing facility notifies the resident or person 48.12 responsible for payment of the increase in writing 30 days 48.13 before the increase takes effect. 48.14 A nursing facility may adjust its rates without giving the 48.15 notice required by this subdivision when the purpose of the rate 48.16 adjustment is to reflect a change in the case-mix classification 48.17 of the resident. If the state fails to set rates as required by 48.18 section 256B.431256B.440, subdivision 1,the time required for 48.19 giving notice is decreased by the number of days by which the 48.20 state was late in setting the rates. 48.21 (b) If the state does not set rates by the date required in 48.22 section 256B.431256B.440, subdivision 1,nursing facilities 48.23 shall meet the requirement for advance notice by informing the 48.24 resident or person responsible for payments, on or before the 48.25 effective date of the increase, that a rate increase will be 48.26 effective on that date. If the exact amount has not yet been 48.27 determined, the nursing facility may raise the rates by the 48.28 amount anticipated to be allowed. Any amounts collected from 48.29 private pay residents in excess of the allowable rate must be 48.30 repaid to private pay residents with interest at the rate used 48.31 by the commissioner of revenue for the late payment of taxes and 48.32 in effect on the date the rate increase is effective.