SF 1335

as introduced - 90th Legislature (2017 - 2018) Posted on 02/24/2017 08:58am

A bill for an act
relating to human services; modifying certain hospital rate and reimbursement
provisions; amending Minnesota Statutes 2016, sections 256.9686, subdivision 8;
256.969, subdivisions 1, 2b, 3a, 3c, 4b, 8, 8c, 9, 12; 256B.75.

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

Section 1.

Minnesota Statutes 2016, section 256.9686, subdivision 8, is amended to read:

Subd. 8.

Rate year.

"Rate year" means a calendar year from January 1 to December 31. new text begin
Effective with the 2012 base year, rate year means a state fiscal year from July 1 to June
30.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 2.

Minnesota Statutes 2016, section 256.969, subdivision 1, is amended to read:

Subdivision 1.

Hospital cost index.

(a) The hospital cost index shall be the change in
the Centers for Medicare and Medicaid Services Inpatient Hospital Market Basket. The
commissioner shall use the indices as forecasted for the midpoint of the prior rate year to
the midpoint of the current rate year.

(b) new text begin Except as authorized under this section, new text end for fiscal years beginning on or after July
1, 1993, the commissioner of human services shall not provide automatic annual inflation
adjustments for hospital payment rates under medical assistance.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2017.
new text end

Sec. 3.

Minnesota Statutes 2016, section 256.969, subdivision 2b, is amended to read:

Subd. 2b.

Hospital payment rates.

(a) For discharges occurring on or after November
1, 2014, hospital inpatient services for hospitals located in Minnesota shall be paid according
to the following:

(1) critical access hospitals as defined by Medicare shall be paid using a cost-based
methodology;

(2) long-term hospitals as defined by Medicare shall be paid on a per diem methodology
under subdivision 25;

(3) rehabilitation hospitals or units of hospitals that are recognized as rehabilitation
distinct parts as defined by Medicare shall be paid according to the methodology under
subdivision 12; and

(4) all other hospitals shall be paid on a diagnosis-related group (DRG) methodology.

(b) For the period beginning January 1, 2011, through October 31, 2014, rates shall not
be rebased, except that a Minnesota long-term hospital shall be rebased effective January
1, 2011, based on its most recent Medicare cost report ending on or before September 1,
2008, with the provisions under subdivisions 9 and 23, based on the rates in effect on
December 31, 2010. For rate setting periods after November 1, 2014, in which the base
years are updated, a Minnesota long-term hospital's base year shall remain within the same
period as other hospitals.

(c) Effective for discharges occurring on and after November 1, 2014, payment rates
for hospital inpatient services provided by hospitals located in Minnesota or the local trade
area, except for the hospitals paid under the methodologies described in paragraph (a),
clauses (2) and (3), shall be rebased, incorporating cost and payment methodologies in a
manner similar to Medicare. The base year for the rates effective November 1, 2014, shall
be calendar year 2012. The rebasing under this paragraph shall be budget neutral, ensuring
that the total aggregate payments under the rebased system are equal to the total aggregate
payments that were made for the same number and types of services in the base year. Separate
budget neutrality calculations shall be determined for payments made to critical access
hospitals and payments made to hospitals paid under the DRG system. Only the rate increases
or decreases under subdivision 3a or 3c that applied to the hospitals being rebased during
the entire base period shall be incorporated into the budget neutrality calculation.

(d) For discharges occurring on or after November 1, 2014, through the next rebasing
that occurs, the rebased rates under paragraph (c) that apply to hospitals under paragraph
(a), clause (4), shall include adjustments to the projected rates that result in no greater than
a five percent increase or decrease from the base year payments for any hospital. Any
adjustments to the rates made by the commissioner under this paragraph and paragraph (e)
shall maintain budget neutrality as described in paragraph (c).

(e) For discharges occurring on or after November 1, 2014, through the next new text begin two new text end rebasing
deleted text begin that occurs deleted text end new text begin periods new text end the commissioner may make additional adjustments to the rebased rates,
and when evaluating whether additional adjustments should be made, the commissioner
shall consider the impact of the rates on the following:

(1) pediatric services;

(2) behavioral health services;

(3) trauma services as defined by the National Uniform Billing Committee;

(4) transplant services;

(5) obstetric services, newborn services, and behavioral health services provided by
hospitals outside the seven-county metropolitan area;

(6) outlier admissions;

(7) low-volume providers; and

(8) services provided by small rural hospitals that are not critical access hospitals.

(f) Hospital payment rates established under paragraph (c) must incorporate the following:

(1) for hospitals paid under the DRG methodology, the base year payment rate per
admission is standardized by the applicable Medicare wage index and adjusted by the
hospital's disproportionate population adjustment;

(2) for critical access hospitals, payment rates for discharges between November 1, 2014,
and June 30, 2015, shall be set to the same rate of payment that applied for discharges on
October 31, 2014;

(3) the cost and charge data used to establish hospital payment rates must only reflect
inpatient services covered by medical assistance; and

(4) in determining hospital payment rates for discharges occurring on or after the rate
year beginning January 1, 2011, through December 31, 2012, the hospital payment rate per
discharge shall be based on the cost-finding methods and allowable costs of the Medicare
program in effect during the base year or years. new text begin In determining hospital payment rates for
discharges in subsequent base years, the per discharge rates shall be based on the cost-finding
methods and allowable costs of the Medicare program in effect during the base year or
years.
new text end

(g) The commissioner shall validate the rates effective November 1, 2014, by applying
the rates established under paragraph (c), and any adjustments made to the rates under
paragraph (d) or (e), to hospital claims paid in calendar year 2013 to determine whether the
total aggregate payments for the same number and types of services under the rebased rates
are equal to the total aggregate payments made during calendar year 2013.

(h) Effective for discharges occurring on or after July 1, 2017, and every two years
thereafter, payment rates under this section shall be rebased to reflect only those changes
in hospital costs between the existing base year and the next base year. new text begin Changes in costs
between base years shall be measured using the lower of the hospital cost index defined in
subdivision 1, paragraph (a), or the percentage change in the case mix adjusted cost per
claim. new text end The commissioner shall establish the base year for each rebasing period considering
the most recent year for which filed Medicare cost reports are available. The estimated
change in the average payment per hospital discharge resulting from a scheduled rebasing
must be calculated and made available to the legislature by January 15 of each year in which
rebasing is scheduled to occur, and must include by hospital the differential in payment
rates compared to the individual hospital's costs.

(i) Effective for discharges occurring on or after July 1, 2015, new text begin inpatient new text end payment rates
for critical access hospitals located in Minnesota or the local trade area shall be determined
using a new cost-based methodology. The commissioner shall establish within the
methodology tiers of payment designed to promote efficiency and cost-effectiveness.
Payment rates for hospitals under this paragraph shall be set at a level that does not exceed
the total cost for critical access hospitals as reflected in base year cost reports. Until the
next rebasing that occurs, the new methodology shall result in no greater than a five percent
decrease from the base year payments for any hospital, except a hospital that had payments
that were greater than 100 percent of the hospital's costs in the base year shall have their
rate set equal to 100 percent of costs in the base year. The rates paid for discharges on and
after July 1, 2016, covered under this paragraph shall be increased by the inflation factor
in subdivision 1, paragraph (a). The new cost-based rate shall be the final rate and shall not
be settled to actual incurred costs. Hospitals shall be assigned a payment tier based on the
following criteria:

(1) hospitals that had payments at or below 80 percent of their costs in the base year
shall have a rate set that equals 85 percent of their base year costs;

(2) hospitals that had payments that were above 80 percent, up to and including 90
percent of their costs in the base year shall have a rate set that equals 95 percent of their
base year costs; and

(3) hospitals that had payments that were above 90 percent of their costs in the base year
shall have a rate set that equals 100 percent of their base year costs.

(j) The commissioner may refine the payment tiers and criteria for critical access hospitals
to coincide with the next rebasing under paragraph (h). The factors used to develop the new
methodology may include, but are not limited to:

(1) the ratio between the hospital's costs for treating medical assistance patients and the
hospital's charges to the medical assistance program;

(2) the ratio between the hospital's costs for treating medical assistance patients and the
hospital's payments received from the medical assistance program for the care of medical
assistance patients;

(3) the ratio between the hospital's charges to the medical assistance program and the
hospital's payments received from the medical assistance program for the care of medical
assistance patients;

(4) the statewide average increases in the ratios identified in clauses (1), (2), and (3);

(5) the proportion of that hospital's costs that are administrative and trends in
administrative costs; and

(6) geographic location.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2017.
new text end

Sec. 4.

Minnesota Statutes 2016, section 256.969, subdivision 3a, is amended to read:

Subd. 3a.

Payments.

(a) Acute care hospital billings under the medical assistance program
must not be submitted until the recipient is discharged. However, the commissioner shall
establish monthly interim payments for inpatient hospitals that have individual patient
lengths of stay over 30 days regardless of diagnostic category. Except as provided in section
256.9693, medical assistance reimbursement for treatment of mental illness shall be
reimbursed based on diagnostic classifications. Individual hospital payments established
under this section and sections 256.9685, 256.9686, and 256.9695, in addition to third-party
and recipient liability, for discharges occurring during the rate year shall not exceed, in
aggregate, the charges for the medical assistance covered inpatient services paid for the
same period of time to the hospital. Services that have rates established under subdivision
deleted text begin 11 or deleted text end 12, must be limited separately from other services. After consulting with the affected
hospitals, the commissioner may consider related hospitals one entity and may merge the
payment rates while maintaining separate provider numbers. The operating and property
base rates per admission or per day shall be derived from the best Medicare and claims data
available when rates are established. The commissioner shall determine the best Medicare
and claims data, taking into consideration variables of recency of the data, audit disposition,
settlement status, and the ability to set rates in a timely manner. The commissioner shall
notify hospitals of payment rates 30 days prior to implementation. The rate setting data
must reflect the admissions data used to establish relative values. The commissioner may
adjust base year cost, relative value, and case mix index data to exclude the costs of services
that have been discontinued by deleted text begin the deleted text end October 1 of the year preceding the rate year or that are
paid separately from inpatient services. Inpatient stays that encompass portions of two or
more rate years shall have payments established based on payment rates in effect at the time
of admission unless the date of admission preceded the rate year in effect by six months or
more. In this case, operating payment rates for services rendered during the rate year in
effect and established based on the date of admission shall be adjusted to the rate year in
effect by the hospital cost index.

(b) For fee-for-service admissions occurring on or after July 1, 2002, the total payment,
before third-party liability and spenddown, made to hospitals for inpatient services is reduced
by .5 percent from the current statutory rates.

(c) In addition to the reduction in paragraph (b), the total payment for fee-for-service
admissions occurring on or after July 1, 2003, made to hospitals for inpatient services before
third-party liability and spenddown, is reduced five percent from the current statutory rates.
Mental health services within diagnosis related groups 424 to 432 or corresponding
APR-DRGs, and facilities defined under subdivision 16 are excluded from this paragraph.

(d) In addition to the reduction in paragraphs (b) and (c), the total payment for
fee-for-service admissions occurring on or after August 1, 2005, made to hospitals for
inpatient services before third-party liability and spenddown, is reduced 6.0 percent from
the current statutory rates. Mental health services within diagnosis related groups 424 to
432 or corresponding APR-DRGs, and facilities defined under subdivision 16 are excluded
from this paragraph. Payments made to managed care plans shall be reduced for services
provided on or after January 1, 2006, to reflect this reduction.

(e) In addition to the reductions in paragraphs (b), (c), and (d), the total payment for
fee-for-service admissions occurring on or after July 1, 2008, through June 30, 2009, made
to hospitals for inpatient services before third-party liability and spenddown, is reduced
3.46 percent from the current statutory rates. Mental health services with diagnosis related
groups 424 to 432 or corresponding APR-DRGs, and facilities defined under subdivision
16 are excluded from this paragraph. Payments made to managed care plans shall be reduced
for services provided on or after January 1, 2009, through June 30, 2009, to reflect this
reduction.

(f) In addition to the reductions in paragraphs (b), (c), and (d), the total payment for
fee-for-service admissions occurring on or after July 1, 2009, through June 30, 2011, made
to hospitals for inpatient services before third-party liability and spenddown, is reduced 1.9
percent from the current statutory rates. Mental health services with diagnosis related groups
424 to 432 or corresponding APR-DRGs, and facilities defined under subdivision 16 are
excluded from this paragraph. Payments made to managed care plans shall be reduced for
services provided on or after July 1, 2009, through June 30, 2011, to reflect this reduction.

(g) In addition to the reductions in paragraphs (b), (c), and (d), the total payment for
fee-for-service admissions occurring on or after July 1, 2011, made to hospitals for inpatient
services before third-party liability and spenddown, is reduced 1.79 percent from the current
statutory rates. Mental health services with diagnosis related groups 424 to 432 or
corresponding APR-DRGs, and facilities defined under subdivision 16 are excluded from
this paragraph. Payments made to managed care plans shall be reduced for services provided
on or after July 1, 2011, to reflect this reduction.

(h) In addition to the reductions in paragraphs (b), (c), (d), (f), and (g), the total payment
for fee-for-service admissions occurring on or after July 1, 2009, made to hospitals for
inpatient services before third-party liability and spenddown, is reduced one percent from
the current statutory rates. Facilities defined under subdivision 16 are excluded from this
paragraph. Payments made to managed care plans shall be reduced for services provided
on or after October 1, 2009, to reflect this reduction.

(i) In addition to the reductions in paragraphs (b), (c), (d), (g), and (h), the total payment
for fee-for-service admissions occurring on or after July 1, 2011, made to hospitals for
inpatient services before third-party liability and spenddown, is reduced 1.96 percent from
the current statutory rates. Facilities defined under subdivision 16 are excluded from this
paragraph. Payments made to managed care plans shall be reduced for services provided
on or after January 1, 2011, to reflect this reduction.

(j) Effective for discharges on and after November 1, 2014, from hospitals paid under
subdivision 2b, paragraph (a), clauses (1) and (4), the rate adjustments in this subdivision
must be incorporated into the rebased rates established under subdivision 2b, paragraph (c),
and must not be applied to each claim.

(k) Effective for discharges on and after July 1, 2015, from hospitals paid under
subdivision 2b, paragraph (a), clauses (2) and (3), the rate adjustments in this subdivision
must be incorporated into the rates and must not be applied to each claim.

new text begin (l) Effective for discharges on and after July 1, 2017, from hospitals paid under
subdivision 2b, paragraph (a), clause (2), the rate adjustments in this subdivision must be
incorporated into the rates and must not be applied to each claim.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2017.
new text end

Sec. 5.

Minnesota Statutes 2016, section 256.969, subdivision 3c, is amended to read:

Subd. 3c.

deleted text begin Rateable deleted text end new text begin Ratable new text end reduction and readmissions reduction.

(a) The total
payment for fee for service admissions occurring on or after September 1, 2011, to October
31, 2014, made to hospitals for inpatient services before third-party liability and spenddown,
is reduced ten percent from the current statutory rates. Facilities defined under subdivision
16, long-term hospitals as determined under the Medicare program, children's hospitals
whose inpatients are predominantly under 18 years of age, and payments under managed
care are excluded from this paragraph.

(b) Effective for admissions occurring during calendar year 2010 and each year after,
the commissioner shall calculate a readmission rate for admissions to all hospitals occurring
within 30 days of a previous discharge using data from the Reducing Avoidable Readmissions
Effectively (RARE) campaign. The commissioner may adjust the readmission rate taking
into account factors such as the medical relationship, complicating conditions, and sequencing
of treatment between the initial admission and subsequent readmissions.

(c) Effective for payments to all hospitals on or after July 1, 2013, through October 31,
2014, the reduction in paragraph (a) is reduced one percentage point for every percentage
point reduction in the overall readmissions rate between the two previous calendar years to
a maximum of five percent.

(d) The exclusion from the rate reduction in paragraph (a) shall apply to a hospital located
in Hennepin County with a licensed capacity of 1,700 beds as of September 1, 2011, for
admissions of children under 18 years of age occurring on or after September 1, 2011,
through August 31, 2013, but shall not apply to payments for admissions occurring on or
after September 1, 2013, through October 31, 2014.

(e) Effective for discharges on or after November 1, 2014, from hospitals paid under
subdivision 2b, paragraph (a), clauses (1) and (4), the rate adjustments in this subdivision
must be incorporated into the rebased rates established under subdivision 2b, paragraph (c),
and must not be applied to each claim.

(f) Effective for discharges on and after July 1, 2015, from hospitals paid under
subdivision 2b, paragraph (a), clauses (2) and (3), the rate adjustments in this subdivision
must be incorporated into the rates and must not be applied to each claim.

new text begin (g) Effective for discharges on and after July 1, 2017, from hospitals paid under
subdivision 2b, paragraph (a), clause (2), the rate adjustments in this subdivision must be
incorporated into the rates and must not be applied to each claim.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2017.
new text end

Sec. 6.

Minnesota Statutes 2016, section 256.969, subdivision 4b, is amended to read:

Subd. 4b.

Medical assistance cost reports for services.

(a) A hospital that meets one
of the following criteria must annually submit to the commissioner medical assistance cost
reports within six months of the end of the hospital's fiscal year:

(1) a hospital designated as a critical access hospital that receives medical assistance
payments; deleted text begin or
deleted text end

(2) a Minnesota hospital or out-of-state hospital located within a Minnesota local trade
area that receives a disproportionate population adjustment under subdivision 9 new text begin ; or
new text end

new text begin (3) a Minnesota hospital that is a licensed children's hospital new text end .

For purposes of this subdivision, local trade area has the meaning given in subdivision
17.

(b) The commissioner shall suspend payments to any hospital that fails to submit a report
required under this subdivision. Payments must remain suspended until the report has been
filed with and accepted by the commissioner.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2017.
new text end

Sec. 7.

Minnesota Statutes 2016, section 256.969, subdivision 8, is amended to read:

Subd. 8.

Unusual length of stay experience.

(a) The commissioner shall establish day
outlier thresholds for each diagnostic category established under subdivision 2 at two standard
deviations beyond the mean length of stay. Payment for the days beyond the outlier threshold
shall be in addition to the operating and property payment rates per admission established
under subdivisions 2 and 2b. Payment for outliers shall be at 70 percent of the allowable
operating cost, after adjustment by the case mix index, hospital cost index, relative values
and the disproportionate population adjustment. The outlier threshold for neonatal and burn
diagnostic categories shall be established at one standard deviation beyond the mean length
of stay, and payment shall be at 90 percent of allowable operating cost calculated in the
same manner as other outliers. A hospital may choose an alternative to the 70 percent outlier
payment that is at a minimum of 60 percent and a maximum of 80 percent if the
commissioner is notified in writing of the request by October 1 of the year preceding the
rate year. The chosen percentage applies to all diagnostic categories except burns and
neonates. The percentage of allowable cost that is unrecognized by the outlier payment shall
be added back to the base year operating payment rate per admission.

(b) Effective for new text begin admissions and new text end transfers occurring on and after November 1, 2014, the
commissioner shall establish payment rates for outlier payments that are based on Medicare
methodologies.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2017.
new text end

Sec. 8.

Minnesota Statutes 2016, section 256.969, subdivision 8c, is amended to read:

Subd. 8c.

Hospital residents.

new text begin (a) new text end For discharges occurring on or after November 1,
2014, payments for hospital residents shall be made as follows:

(1) payments for the first 180 days of inpatient care shall be the APR-DRG system plus
any outliers; and

(2) payment for all medically necessary patient care subsequent to the first 180 days
shall be reimbursed at a rate computed by multiplying the statewide average cost-to-charge
ratio by the usual and customary charges.

new text begin (b) For discharges occurring on or after July 1, 2017, payment for hospital residents
shall be equal to the payments under subdivision 8, paragraph (b).
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2017.
new text end

Sec. 9.

Minnesota Statutes 2016, section 256.969, subdivision 9, is amended to read:

Subd. 9.

Disproportionate numbers of low-income patients served.

(a) For admissions
occurring on or after July 1, 1993, the medical assistance disproportionate population
adjustment shall comply with federal law and shall be paid to a hospital, excluding regional
treatment centers and facilities of the federal Indian Health Service, with a medical assistance
inpatient utilization rate in excess of the arithmetic mean. The adjustment must be determined
as follows:

(1) for a hospital with a medical assistance inpatient utilization rate above the arithmetic
mean for all hospitals excluding regional treatment centers and facilities of the federal Indian
Health Service but less than or equal to one standard deviation above the mean, the
adjustment must be determined by multiplying the total of the operating and property
payment rates by the difference between the hospital's actual medical assistance inpatient
utilization rate and the arithmetic mean for all hospitals excluding regional treatment centers
and facilities of the federal Indian Health Service; and

(2) for a hospital with a medical assistance inpatient utilization rate above one standard
deviation above the mean, the adjustment must be determined by multiplying the adjustment
that would be determined under clause (1) for that hospital by 1.1. The commissioner shall
report annually on the number of hospitals likely to receive the adjustment authorized by
this paragraph. The commissioner shall specifically report on the adjustments received by
public hospitals and public hospital corporations located in cities of the first class.

(b) Certified public expenditures made by Hennepin County Medical Center shall be
considered Medicaid disproportionate share hospital payments. Hennepin County and
Hennepin County Medical Center shall report by June 15, 2007, on payments made beginning
July 1, 2005, or another date specified by the commissioner, that may qualify for
reimbursement under federal law. Based on these reports, the commissioner shall apply for
federal matching funds.

(c) Upon federal approval of the related state plan amendment, paragraph (b) is effective
retroactively from July 1, 2005, or the earliest effective date approved by the Centers for
Medicare and Medicaid Services.

(d) Effective July 1, 2015, disproportionate share hospital (DSH) payments shall be paid
in accordance with a new methodology using 2012 as the base year. Annual payments made
under this paragraph shall equal the total amount of payments made for 2012. A licensed
children's hospital shall receive only a single DSH factor for children's hospitals. Other
DSH factors may be combined to arrive at a single factor for each hospital that is eligible
for DSH payments. The new methodology shall make payments only to hospitals located
in Minnesota and include the following factors:

(1) a licensed children's hospital with at least 1,000 fee-for-service discharges in the
base year shall receive a factor of 0.868. A licensed children's hospital with less than 1,000
fee-for-service discharges in the base year shall receive a factor of 0.7880;

(2) a hospital that has in effect for the initial rate year a contract with the commissioner
to provide extended psychiatric inpatient services under section 256.9693 shall receive a
factor of 0.0160;

(3) a hospital that has received payment from the fee-for-service program for at least 20
transplant services in the base year shall receive a factor of 0.0435;

(4) a hospital that has a medical assistance utilization rate in the base year between 20
percent up to one standard deviation above the statewide mean utilization rate shall receive
a factor of 0.0468;

(5) a hospital that has a medical assistance utilization rate in the base year that is at least
one standard deviation above the statewide mean utilization rate but is less than three standard
deviations above the mean shall receive a factor of 0.2300; and

(6) a hospital that has a medical assistance utilization rate in the base year that is at least
three standard deviations above the statewide mean utilization rate shall receive a factor of
0.3711.

(e) Any payments or portion of payments made to a hospital under this subdivision that
are subsequently returned to the commissioner because the payments are found to exceed
the hospital-specific DSH limit for that hospital shall be redistributed, proportionate to the
number of fee-for-service discharges, to other DSH-eligible deleted text begin nonchildren's deleted text end new text begin non-children's new text end
hospitals that have a medical assistance utilization rate that is at least one standard deviation
above the mean.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2017.
new text end

Sec. 10.

Minnesota Statutes 2016, section 256.969, subdivision 12, is amended to read:

Subd. 12.

Rehabilitation hospitals and distinct parts.

(a) Units of hospitals that are
recognized as rehabilitation distinct parts by the Medicare program shall have separate
provider numbers under the medical assistance program for rate establishment and billing
purposes only. These units shall also have operating payment rates and the disproportionate
population adjustment, if allowed by federal law, established separately from other inpatient
hospital services.

(b) The commissioner shall establish separate relative values under subdivision 2 for
rehabilitation hospitals and distinct parts as defined by the Medicare program. Effective for
discharges occurring on and after November 1, 2014, the commissioner, to the extent
possible, shall replicate the existing payment rate methodology under the new diagnostic
classification system. The result must be budget neutral, ensuring that the total aggregate
payments under the new system are equal to the total aggregate payments made for the same
number and types of services in the base year, calendar year 2012.

(c) For individual hospitals that did not have separate medical assistance rehabilitation
provider numbers or rehabilitation distinct parts in the base year, hospitals shall provide the
information needed to separate rehabilitation distinct part cost and claims data from other
inpatient service data.

new text begin (d) Effective with discharges on or after July 1, 2017, payment to rehabilitation hospitals
shall be established under subdivision 2d, paragraph (a), clause (4).
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2017.
new text end

Sec. 11.

Minnesota Statutes 2016, section 256B.75, is amended to read:

256B.75 HOSPITAL OUTPATIENT REIMBURSEMENT.

(a) For outpatient hospital facility fee payments for services rendered on or after October
1, 1992, the commissioner of human services shall pay the lower of (1) submitted charge,
or (2) 32 percent above the rate in effect on June 30, 1992, except for those services for
which there is a federal maximum allowable payment. Effective for services rendered on
or after January 1, 2000, payment rates for nonsurgical outpatient hospital facility fees and
emergency room facility fees shall be increased by eight percent over the rates in effect on
December 31, 1999, except for those services for which there is a federal maximum allowable
payment. Services for which there is a federal maximum allowable payment shall be paid
at the lower of (1) submitted charge, or (2) the federal maximum allowable payment. Total
aggregate payment for outpatient hospital facility fee services shall not exceed the Medicare
upper limit. If it is determined that a provision of this section conflicts with existing or
future requirements of the United States government with respect to federal financial
participation in medical assistance, the federal requirements prevail. The commissioner
may, in the aggregate, prospectively reduce payment rates to avoid reduced federal financial
participation resulting from rates that are in excess of the Medicare upper limitations.

(b) Notwithstanding paragraph (a), payment for outpatient, emergency, and ambulatory
surgery hospital facility fee services for critical access hospitals designated under section
144.1483, clause (9), shall be paid on a cost-based payment system that is based on the
cost-finding methods and allowable costs of the Medicare program. Effective for services
provided on or after July 1, 2015, rates established for critical access hospitals under this
paragraph for the applicable payment year shall be the final payment and shall not be settled
to actual costs. new text begin Effective for services delivered on or after the first day of the hospital's fiscal
year ending in 2016, the rate for outpatient hospital services shall be computed using
information from each hospital's Medicare cost report as filed with Medicare for the year
that is two years before the year that the rate is being computed. Rates shall be computed
using information from Worksheet C series until the department finalizes the medical
assistance cost reporting process for critical access hospitals. After the cost reporting process
is finalized, rates shall be computed using information from Title XIX Worksheet D series.
The outpatient rate shall be equal to ancillary cost plus outpatient cost, excluding costs
related to rural health clinics and federally qualified health clinics, divided by ancillary
charges plus outpatient charges, excluding charges related to rural health clinics and federally
qualified health clinics.
new text end

(c) Effective for services provided on or after July 1, 2003, rates that are based on the
Medicare outpatient prospective payment system shall be replaced by a budget neutral
prospective payment system that is derived using medical assistance data. The commissioner
shall provide a proposal to the 2003 legislature to define and implement this provision.

(d) For fee-for-service services provided on or after July 1, 2002, the total payment,
before third-party liability and spenddown, made to hospitals for outpatient hospital facility
services is reduced by .5 percent from the current statutory rate.

(e) In addition to the reduction in paragraph (d), the total payment for fee-for-service
services provided on or after July 1, 2003, made to hospitals for outpatient hospital facility
services before third-party liability and spenddown, is reduced five percent from the current
statutory rates. Facilities defined under section 256.969, subdivision 16, are excluded from
this paragraph.

(f) In addition to the reductions in paragraphs (d) and (e), the total payment for
fee-for-service services provided on or after July 1, 2008, made to hospitals for outpatient
hospital facility services before third-party liability and spenddown, is reduced three percent
from the current statutory rates. Mental health services and facilities defined under section
256.969, subdivision 16, are excluded from this paragraph.

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new text begin This section is effective July 1, 2017.
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