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Key: (1) language to be deleted (2) new language

                            CHAPTER 449-H.F.No. 3020 
                  An act relating to human services; modifying 
                  provisions in long-term care; amending Minnesota 
                  Statutes 1998, sections 256B.411, subdivision 2; and 
                  256B.431, subdivisions 1, 3a, 10, 16, 18, 21, 22, and 
                  25; Minnesota Statutes 1999 Supplement, sections 
                  256B.0913, subdivision 5; 256B.431, subdivisions 17 
                  and 26; and 256B.434, subdivisions 3 and 4; repealing 
                  Minnesota Statutes 1998, sections 256B.03, subdivision 
                  2; 256B.431, subdivisions 2, 2a, 2f, 2h, 2m, 2p, 2q, 
                  3, 3b, 3d, 3h, 3j, 4, 5, 7, 8, 9, 9a, 12, and 24; 
                  256B.48, subdivision 9; 256B.50, subdivision 3; and 
                  256B.74, subdivision 3. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
           Section 1.  Minnesota Statutes 1999 Supplement, section 
        256B.0913, subdivision 5, is amended to read: 
           Subd. 5.  [SERVICES COVERED UNDER ALTERNATIVE CARE.] (a) 
        Alternative care funding may be used for payment of costs of: 
           (1) adult foster care; 
           (2) adult day care; 
           (3) home health aide; 
           (4) homemaker services; 
           (5) personal care; 
           (6) case management; 
           (7) respite care; 
           (8) assisted living; 
           (9) residential care services; 
           (10) care-related supplies and equipment; 
           (11) meals delivered to the home; 
           (12) transportation; 
           (13) skilled nursing; 
           (14) chore services; 
           (15) companion services; 
           (16) nutrition services; 
           (17) training for direct informal caregivers; 
           (18) telemedicine devices to monitor recipients in their 
        own homes as an alternative to hospital care, nursing home care, 
        or home visits; and 
           (19) other services including direct cash payments to 
        clients, approved by the county agency, subject to the 
        provisions of paragraph (m).  Total annual payments for other 
        services for all clients within a county may not exceed either 
        ten percent of that county's annual alternative care program 
        base allocation or $5,000, whichever is greater.  In no case 
        shall this amount exceed the county's total annual alternative 
        care program base allocation. 
           (b) The county agency must ensure that the funds are used 
        only to supplement and not supplant services available through 
        other public assistance or services programs. 
           (c) Unless specified in statute, the service standards for 
        alternative care services shall be the same as the service 
        standards defined in the elderly waiver.  Except for the county 
        agencies' approval of direct cash payments to clients, persons 
        or agencies must be employed by or under a contract with the 
        county agency or the public health nursing agency of the local 
        board of health in order to receive funding under the 
        alternative care program. 
           (d) The adult foster care rate shall be considered a 
        difficulty of care payment and shall not include room and 
        board.  The adult foster care daily rate shall be negotiated 
        between the county agency and the foster care provider.  The 
        rate established under this section shall not exceed 75 percent 
        of the state average monthly nursing home payment for the case 
        mix classification to which the individual receiving foster care 
        is assigned, and it must allow for other alternative care 
        services to be authorized by the case manager. 
           (e) Personal care services may be provided by a personal 
        care provider organization.  A county agency may contract with a 
        relative of the client to provide personal care services, but 
        must ensure nursing supervision.  Covered personal care services 
        defined in section 256B.0627, subdivision 4, must meet 
        applicable standards in Minnesota Rules, part 9505.0335. 
           (f) A county may use alternative care funds to purchase 
        medical supplies and equipment without prior approval from the 
        commissioner when:  (1) there is no other funding source; (2) 
        the supplies and equipment are specified in the individual's 
        care plan as medically necessary to enable the individual to 
        remain in the community according to the criteria in Minnesota 
        Rules, part 9505.0210, item A; and (3) the supplies and 
        equipment represent an effective and appropriate use of 
        alternative care funds.  A county may use alternative care funds 
        to purchase supplies and equipment from a non-Medicaid certified 
        vendor if the cost for the items is less than that of a Medicaid 
        vendor.  A county is not required to contract with a provider of 
        supplies and equipment if the monthly cost of the supplies and 
        equipment is less than $250.  
           (g) For purposes of this section, residential care services 
        are services which are provided to individuals living in 
        residential care homes.  Residential care homes are currently 
        licensed as board and lodging establishments and are registered 
        with the department of health as providing special services.  
        Residential care services are defined as "supportive services" 
        and "health-related services."  "Supportive services" means the 
        provision of up to 24-hour supervision and oversight.  
        Supportive services includes:  (1) transportation, when provided 
        by the residential care center only; (2) socialization, when 
        socialization is part of the plan of care, has specific goals 
        and outcomes established, and is not diversional or recreational 
        in nature; (3) assisting clients in setting up meetings and 
        appointments; (4) assisting clients in setting up medical and 
        social services; (5) providing assistance with personal laundry, 
        such as carrying the client's laundry to the laundry room.  
        Assistance with personal laundry does not include any laundry, 
        such as bed linen, that is included in the room and board rate.  
        Health-related services are limited to minimal assistance with 
        dressing, grooming, and bathing and providing reminders to 
        residents to take medications that are self-administered or 
        providing storage for medications, if requested.  Individuals 
        receiving residential care services cannot receive both personal 
        care services and residential care homemaking services.  
           (h) For the purposes of this section, "assisted living" 
        refers to supportive services provided by a single vendor to 
        clients who reside in the same apartment building of three or 
        more units which are not subject to registration under chapter 
        144D.  Assisted living services are defined as up to 24-hour 
        supervision, and oversight, supportive services as defined in 
        clause (1), individualized home care aide tasks as defined in 
        clause (2), and individualized home management tasks as defined 
        in clause (3) provided to residents of a residential center 
        living in their units or apartments with a full kitchen and 
        bathroom.  A full kitchen includes a stove, oven, refrigerator, 
        food preparation counter space, and a kitchen utensil storage 
        compartment.  Assisted living services must be provided by the 
        management of the residential center or by providers under 
        contract with the management or with the county. 
           (1) Supportive services include:  
           (i) socialization, when socialization is part of the plan 
        of care, has specific goals and outcomes established, and is not 
        diversional or recreational in nature; 
           (ii) assisting clients in setting up meetings and 
        appointments; and 
           (iii) providing transportation, when provided by the 
        residential center only.  
           Individuals receiving assisted living services will not 
        receive both assisted living services and homemaking or personal 
        care services.  Individualized means services are chosen and 
        designed specifically for each resident's needs, rather than 
        provided or offered to all residents regardless of their 
        illnesses, disabilities, or physical conditions.  
           (2) Home care aide tasks means:  
           (i) preparing modified diets, such as diabetic or low 
        sodium diets; 
           (ii) reminding residents to take regularly scheduled 
        medications or to perform exercises; 
           (iii) household chores in the presence of technically 
        sophisticated medical equipment or episodes of acute illness or 
        infectious disease; 
           (iv) household chores when the resident's care requires the 
        prevention of exposure to infectious disease or containment of 
        infectious disease; and 
           (v) assisting with dressing, oral hygiene, hair care, 
        grooming, and bathing, if the resident is ambulatory, and if the 
        resident has no serious acute illness or infectious disease.  
        Oral hygiene means care of teeth, gums, and oral prosthetic 
        devices.  
           (3) Home management tasks means:  
           (i) housekeeping; 
           (ii) laundry; 
           (iii) preparation of regular snacks and meals; and 
           (iv) shopping.  
           Assisted living services as defined in this section shall 
        not be authorized in boarding and lodging establishments 
        licensed according to sections 157.011 and 157.15 to 157.22. 
           (i) For establishments registered under chapter 144D, 
        assisted living services under this section means the services 
        described and licensed under section 144A.4605. 
           (j) For the purposes of this section, reimbursement for 
        assisted living services and residential care services shall be 
        a monthly rate negotiated and authorized by the county agency 
        based on an individualized service plan for each resident.  The 
        rate shall not exceed the nonfederal share of the greater of 
        either the statewide or any of the geographic groups' weighted 
        average monthly medical assistance nursing facility payment rate 
        of the case mix resident class to which the 180-day eligible 
        client would be assigned under Minnesota Rules, parts 9549.0050 
        to 9549.0059, unless the services are provided by a home care 
        provider licensed by the department of health and are provided 
        in a building that is registered as a housing with services 
        establishment under chapter 144D and that provides 24-hour 
        supervision. 
           (k) For purposes of this section, companion services are 
        defined as nonmedical care, supervision and oversight, provided 
        to a functionally impaired adult.  Companions may assist the 
        individual with such tasks as meal preparation, laundry and 
        shopping, but do not perform these activities as discrete 
        services.  The provision of companion services does not entail 
        hands-on medical care.  Providers may also perform light 
        housekeeping tasks which are incidental to the care and 
        supervision of the recipient.  This service must be approved by 
        the case manager as part of the care plan.  Companion services 
        must be provided by individuals or organizations who are under 
        contract with the local agency to provide the service.  Any 
        person related to the waiver recipient by blood, marriage or 
        adoption cannot be reimbursed under this service.  Persons 
        providing companion services will be monitored by the case 
        manager. 
           (l) For purposes of this section, training for direct 
        informal caregivers is defined as a classroom or home course of 
        instruction which may include:  transfer and lifting skills, 
        nutrition, personal and physical cares, home safety in a home 
        environment, stress reduction and management, behavioral 
        management, long-term care decision making, care coordination 
        and family dynamics.  The training is provided to an informal 
        unpaid caregiver of a 180-day eligible client which enables the 
        caregiver to deliver care in a home setting with high levels of 
        quality.  The training must be approved by the case manager as 
        part of the individual care plan.  Individuals, agencies, and 
        educational facilities which provide caregiver training and 
        education will be monitored by the case manager. 
           (m) A county agency may make payment from their alternative 
        care program allocation for other services provided to an 
        alternative care program recipient if those services prevent, 
        shorten, or delay institutionalization.  These services may 
        include direct cash payments to the recipient for the purpose of 
        purchasing the recipient's services.  The following provisions 
        apply to payments under this paragraph: 
           (1) a cash payment to a client under this provision cannot 
        exceed 80 percent of the monthly payment limit for that client 
        as specified in subdivision 4, paragraph (a), clause (7); 
           (2) a county may not approve any cash payment for a client 
        who has been assessed as having a dependency in orientation, 
        unless the client has an authorized representative under section 
        256.476, subdivision 2, paragraph (g), or for a client who is 
        concurrently receiving adult foster care, residential care, or 
        assisted living services; 
           (3) any service approved under this section must be a 
        service which meets the purpose and goals of the program as 
        listed in subdivision 1; 
           (4) cash payments must also meet the criteria of and are 
        governed by the procedures and liability protection established 
        in section 256.476, subdivision 4, paragraph 
        paragraphs (b) through (h), and recipients of cash grants must 
        meet the requirements in section 256.476, subdivision 10; and 
           (5) the county shall report client outcomes, services, and 
        costs under this paragraph in a manner prescribed by the 
        commissioner. 
        Upon implementation of direct cash payments to clients under 
        this section, any person determined eligible for the alternative 
        care program who chooses a cash payment approved by the county 
        agency shall receive the cash payment under this section and not 
        under section 256.476 unless the person was receiving a consumer 
        support grant under section 256.476 before implementation of 
        direct cash payments under this section. 
           Sec. 2.  Minnesota Statutes 1998, section 256B.411, 
        subdivision 2, is amended to read: 
           Subd. 2.  [REQUIREMENTS.] No medical assistance payments 
        shall be made to any nursing facility unless the nursing 
        facility is certified to participate in the medical assistance 
        program under title XIX of the federal Social Security Act and 
        has in effect a provider agreement with the commissioner meeting 
        the requirements of state and federal statutes and rules.  No 
        medical assistance payments shall be made to any nursing 
        facility unless the nursing facility complies with all 
        requirements of Minnesota Statutes including, but not limited 
        to, this chapter and rules adopted under it that govern 
        participation in the program.  This section applies whether the 
        nursing facility participates fully in the medical assistance 
        program or is withdrawing from the medical assistance program.  
        No future payments may be made to any nursing facility which has 
        withdrawn or is withdrawing from the medical assistance program 
        except as provided in section 256B.48, subdivision 1a; provided, 
        however, that, or federal law.  Payments may also be made under 
        a court order entered on or before June 7, 1985, unless the 
        court order is reversed on appeal. 
           Sec. 3.  Minnesota Statutes 1998, section 256B.431, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [IN GENERAL.] The commissioner shall 
        determine prospective payment rates for resident care costs.  In 
        determining the rates, the commissioner shall group nursing 
        facilities according to different levels of care and geographic 
        location until July 1, 1985.  For rates established on or after 
        July 1, 1985, the commissioner shall develop procedures for 
        determining operating cost payment rates that take into account 
        the mix of resident needs, geographic location, and other 
        factors as determined by the commissioner.  The commissioner 
        shall consider whether the fact that a facility is attached to a 
        hospital or has an average length of stay of 180 days or less 
        should be taken into account in determining rates.  The 
        commissioner shall consider the use of the standard metropolitan 
        statistical areas when developing groups by geographic 
        location.  Until the commissioner establishes procedures for 
        determining operating cost payment rates, the commissioner shall 
        group all convalescent and nursing care units attached to 
        hospitals into one group for purposes of determining 
        reimbursement for operating costs.  On or before June 15, 1983, 
        the commissioner shall mail notices to each nursing facility of 
        the rates to be effective from July 1 of that year to June 30 of 
        the following year.  In subsequent years, The commissioner shall 
        provide notice to each nursing facility on or before May 1 of 
        the rates effective for the following rate year.  If a statute 
        enacted after May 1 affects the rates, the commissioner shall 
        provide a revised notice to each nursing facility as soon as 
        possible except that if legislation is pending on May 1 that may 
        affect rates for nursing facilities, the commissioner shall set 
        the rates after the legislation is enacted and provide notice to 
        each facility as soon as possible.  
           The commissioner shall establish, by rule, limitations on 
        compensation recognized in the historical base for top 
        management personnel.  For rate years beginning July 1, 1985, 
        the commissioner shall not provide, by rule, limitations on top 
        management personnel.  Compensation for top management personnel 
        shall continue to be categorized as a general and administrative 
        cost and is subject to any limits imposed on that cost 
        category.  The commissioner shall also establish, by rule, 
        limitations on allowable nursing hours for each level of care 
        for the rate years beginning July 1, 1983 and July 1, 1984.  For 
        the rate year beginning July 1, 1984, nursing facilities in 
        which the nursing hours exceeded 2.9 hours per day for skilled 
        nursing care or 2.3 hours per day for intermediate care for the 
        reporting year ending on September 30, 1983, shall be limited to 
        a maximum of 3.2 hours per day for skilled nursing care and 2.6 
        hours per day for intermediate care. 
           Sec. 4.  Minnesota Statutes 1998, section 256B.431, 
        subdivision 3a, is amended to read: 
           Subd. 3a.  [PROPERTY-RELATED COSTS AFTER JULY 1, 1985.] (a) 
        For rate years beginning on or after July 1, 1985, the 
        commissioner, by permanent rule, shall reimburse nursing 
        facility providers that are vendors in the medical assistance 
        program for the rental use of real estate and depreciable 
        equipment.  "Real estate" means land improvements, buildings, 
        and attached fixtures used directly for resident care.  
        "Depreciable equipment" means the standard movable resident care 
        equipment and support service equipment generally used in 
        long-term care facilities.  
           (b) In developing the method for determining payment rates 
        for the rental use of nursing facilities, the commissioner shall 
        consider factors designed to:  
           (1) simplify the administrative procedures for determining 
        payment rates for property-related costs; 
           (2) minimize discretionary or appealable decisions; 
           (3) eliminate any incentives to sell nursing facilities; 
           (4) recognize legitimate costs of preserving and replacing 
        property; 
           (5) recognize the existing costs of outstanding 
        indebtedness allowable under the statutes and rules in effect on 
        May 1, 1983; 
           (6) address the current value of, if used directly for 
        patient care, land improvements, buildings, attached fixtures, 
        and equipment; 
           (7) establish an investment per bed limitation; 
           (8) reward efficient management of capital assets; 
           (9) provide equitable treatment of facilities; 
           (10) consider a variable rate; and 
           (11) phase-in implementation of the rental reimbursement 
        method.  
           (c) No later than January 1, 1984, the commissioner shall 
        report to the legislature on any further action necessary or 
        desirable in order to implement the purposes and provisions of 
        this subdivision.  
           (d) (c) For rate years beginning on or after July 1, 1987, 
        a nursing facility which has reduced licensed bed capacity after 
        January 1, 1986, shall be allowed to: 
           (1) aggregate the applicable investment per bed limits 
        based on the number of beds licensed prior to the reduction; and 
           (2) establish capacity days for each rate year following 
        the licensure reduction based on the number of beds licensed on 
        the previous April 1 if the commissioner is notified of the 
        change by April 4.  The notification must include a copy of the 
        delicensure request that has been submitted to the commissioner 
        of health. 
           (e) Until the rental reimbursement method is fully phased 
        in, a nursing facility whose final property-related payment rate 
        is the rental rate shall continue to have its property-related 
        payment rates established based on the rental reimbursement 
        method. 
           (f) (d) For rate years beginning on or after July 1, 1989, 
        the interest expense that results from a refinancing of a 
        nursing facility's demand call loan, when the loan that must be 
        refinanced was incurred before May 22, 1983, is an allowable 
        interest expense if: 
           (1) the demand call loan or any part of it was in the form 
        of a loan that was callable at the demand of the lender; 
           (2) the demand call loan or any part of it was called by 
        the lender through no fault of the nursing facility; 
           (3) the demand call loan or any part of it was made by a 
        government agency operating under a statutory or regulatory loan 
        program; 
           (4) the refinanced debt does not exceed the sum of the 
        allowable remaining balance of the demand call loan at the time 
        of payment on the demand call loan and refinancing costs; 
           (5) the term of the refinanced debt does not exceed the 
        remaining term of the demand call loan, had the debt not been 
        subject to an on-call payment demand; and 
           (6) the refinanced debt is not a debt between related 
        organizations as defined in Minnesota Rules, part 9549.0020, 
        subpart 38. 
           Sec. 5.  Minnesota Statutes 1998, section 256B.431, 
        subdivision 10, is amended to read: 
           Subd. 10.  [PROPERTY RATE ADJUSTMENTS AND CONSTRUCTION 
        PROJECTS.] A nursing facility's request for a property-related 
        payment rate adjustment and the related supporting documentation 
        of project construction cost information must be submitted to 
        the commissioner within 60 days after the construction project's 
        completion date to be considered eligible for a property-related 
        payment rate adjustment.  Construction projects with completion 
        dates within one year of the completion date associated with the 
        property rate adjustment request and phased projects with 
        project completion dates within three years of the last phase of 
        the phased project must be aggregated for purposes of the 
        minimum thresholds in subdivisions 16 and 17, and the maximum 
        threshold in section 144A.071, subdivision 2.  "Construction 
        project," and "project construction costs," and "phased project" 
        have the meanings given them in Minnesota Rules, part 4655.1110 
        (Emergency) Statutes, section 144A.071, subdivision 1a. 
           Sec. 6.  Minnesota Statutes 1998, section 256B.431, 
        subdivision 16, is amended to read: 
           Subd. 16.  [MAJOR ADDITIONS AND REPLACEMENTS; EQUITY 
        INCENTIVE.] For rate years beginning after June 30, 1993, if a 
        nursing facility acquires capital assets in connection with a 
        project approved under the moratorium exception process in 
        section 144A.073 or in connection with an addition to or 
        replacement of buildings, attached fixtures, or land 
        improvements for which the total historical cost of those 
        capital asset additions exceeds the lesser of $150,000 or ten 
        percent of the most recent appraised value, the nursing facility 
        shall be eligible for an equity incentive payment rate as in 
        paragraphs (a) to (d).  This computation is separate from the 
        determination of the nursing facility's rental rate.  An equity 
        incentive payment rate as computed under this subdivision is 
        limited to one in a 12-month period. 
           (a) An eligible nursing facility shall receive an equity 
        incentive payment rate equal to the allowable historical cost of 
        the capital asset acquired, minus the allowable debt directly 
        identified to that capital asset, multiplied by the equity 
        incentive factor as described in paragraphs (b) and (c), and 
        divided by the nursing facility's occupancy factor under 
        subdivision 3f, paragraph (c).  This amount shall be added to 
        the nursing facility's total payment rate and shall be effective 
        the same day as the incremental increase in paragraph (d) or 
        subdivision 17.  The allowable historical cost of the capital 
        assets and the allowable debt shall be determined as provided in 
        Minnesota Rules, parts 9549.0010 to 9549.0080, and this section. 
           (b) The equity incentive factor shall be determined under 
        clauses (1) to (4):  
           (1) divide the initial allowable debt in paragraph (a) by 
        the initial historical cost of the capital asset additions 
        referred to in paragraph (a), then cube the quotient, 
           (2) subtract the amount calculated in clause (1) from the 
        number one, 
           (3) determine the difference between the rental factor and 
        the lesser of two percentage points above the posted yield for 
        standard conventional fixed rate mortgages of the Federal Home 
        Loan Mortgage Corporation as published in the Wall Street 
        Journal and in effect on the first day of the month the debt or 
        cost is incurred, or 16 percent, 
           (4) multiply the amount calculated in clause (2) by the 
        amount calculated in clause (3). 
           (c) The equity incentive payment rate shall be limited to 
        the term of the allowable debt in paragraph (a), not greater 
        than 20 years nor less than ten years.  If no debt is incurred 
        in acquiring the capital asset, the equity incentive payment 
        rate shall be paid for ten years.  The sale of a nursing 
        facility under subdivision 14 shall terminate application of the 
        equity incentive payment rate effective on the date provided in 
        subdivision 4 14, paragraph (f), for the sale. 
           (d) A nursing facility with an addition to or a renovation 
        of its buildings, attached fixtures, or land improvements 
        meeting the criteria in this subdivision and not receiving the 
        property-related payment rate adjustment in subdivision 17, 
        shall receive the incremental increase in the nursing facility's 
        rental rate as determined under Minnesota Rules, parts 9549.0010 
        to 9549.0080, and this section.  The incremental increase shall 
        be added to the nursing facility's property-related payment rate.
        The effective date of this incremental increase shall be the 
        first day of the month following the month in which the addition 
        or replacement is completed. 
           Sec. 7.  Minnesota Statutes 1999 Supplement, section 
        256B.431, subdivision 17, is amended to read: 
           Subd. 17.  [SPECIAL PROVISIONS FOR MORATORIUM EXCEPTIONS.] 
        (a) Notwithstanding Minnesota Rules, part 9549.0060, subpart 3, 
        for rate periods beginning on October 1, 1992, and for rate 
        years beginning after June 30, 1993, a nursing facility that (1) 
        has completed a construction project approved under section 
        144A.071, subdivision 4a, clause (m); (2) has completed a 
        construction project approved under section 144A.071, 
        subdivision 4a, and effective after June 30, 1995; or (3) has 
        completed a renovation, replacement, or upgrading project 
        approved under the moratorium exception process in section 
        144A.073 shall be reimbursed for costs directly identified to 
        that project as provided in subdivision 16 and this subdivision. 
           (b) Notwithstanding Minnesota Rules, part 9549.0060, 
        subparts 5, item A, subitems (1) and (3), and 7, item D, 
        allowable interest expense on debt shall include: 
           (1) interest expense on debt related to the cost of 
        purchasing or replacing depreciable equipment, excluding 
        vehicles, not to exceed six percent of the total historical cost 
        of the project; and 
           (2) interest expense on debt related to financing or 
        refinancing costs, including costs related to points, loan 
        origination fees, financing charges, legal fees, and title 
        searches; and issuance costs including bond discounts, bond 
        counsel, underwriter's counsel, corporate counsel, printing, and 
        financial forecasts.  Allowable debt related to items in this 
        clause shall not exceed seven percent of the total historical 
        cost of the project.  To the extent these costs are financed, 
        the straight-line amortization of the costs in this clause is 
        not an allowable cost; and 
           (3) interest on debt incurred for the establishment of a 
        debt reserve fund, net of the interest earned on the debt 
        reserve fund. 
           (c) Debt incurred for costs under paragraph (b) is not 
        subject to Minnesota Rules, part 9549.0060, subpart 5, item A, 
        subitem (5) or (6). 
           (d) The incremental increase in a nursing facility's rental 
        rate, determined under Minnesota Rules, parts 9549.0010 to 
        9549.0080, and this section, resulting from the acquisition of 
        allowable capital assets, and allowable debt and interest 
        expense under this subdivision shall be added to its 
        property-related payment rate and shall be effective on the 
        first day of the month following the month in which the 
        moratorium project was completed. 
           (e) Notwithstanding subdivision 3f, paragraph (a), for rate 
        periods beginning on October 1, 1992, and for rate years 
        beginning after June 30, 1993, the replacement-costs-new per bed 
        limit to be used in Minnesota Rules, part 9549.0060, subpart 4, 
        item B, for a nursing facility that has completed a renovation, 
        replacement, or upgrading project that has been approved under 
        the moratorium exception process in section 144A.073, or that 
        has completed an addition to or replacement of buildings, 
        attached fixtures, or land improvements for which the total 
        historical cost exceeds the lesser of $150,000 or ten percent of 
        the most recent appraised value, must be $47,500 per licensed 
        bed in multiple-bed rooms and $71,250 per licensed bed in a 
        single-bed room.  These amounts must be adjusted annually as 
        specified in subdivision 3f, paragraph (a), beginning January 1, 
        1993. 
           (f) A nursing facility that completes a project identified 
        in this subdivision and, as of April 17, 1992, has not been 
        mailed a rate notice with a special appraisal for a completed 
        project, or completes a project after April 17, 1992, but before 
        September 1, 1992, may elect either to request a special 
        reappraisal with the corresponding adjustment to the 
        property-related payment rate under the laws in effect on June 
        30, 1992, or to submit their capital asset and debt information 
        after that date and obtain the property-related payment rate 
        adjustment under this section, but not both. 
           (g) (f) For purposes of this paragraph, a total replacement 
        means the complete replacement of the nursing facility's 
        physical plant through the construction of a new physical plant 
        or the transfer of the nursing facility's license from one 
        physical plant location to another.  For total replacement 
        projects completed on or after July 1, 1992, the commissioner 
        shall compute the incremental change in the nursing facility's 
        rental per diem, for rate years beginning on or after July 1, 
        1995, by replacing its appraised value, including the historical 
        capital asset costs, and the capital debt and interest costs 
        with the new nursing facility's allowable capital asset costs 
        and the related allowable capital debt and interest costs.  If 
        the new nursing facility has decreased its licensed capacity, 
        the aggregate investment per bed limit in subdivision 3a, 
        paragraph (d) (c), shall apply.  If the new nursing facility has 
        retained a portion of the original physical plant for nursing 
        facility usage, then a portion of the appraised value prior to 
        the replacement must be retained and included in the calculation 
        of the incremental change in the nursing facility's rental per 
        diem.  For purposes of this part, the original nursing facility 
        means the nursing facility prior to the total replacement 
        project.  The portion of the appraised value to be retained 
        shall be calculated according to clauses (1) to (3): 
           (1) The numerator of the allocation ratio shall be the 
        square footage of the area in the original physical plant which 
        is being retained for nursing facility usage. 
           (2) The denominator of the allocation ratio shall be the 
        total square footage of the original nursing facility physical 
        plant. 
           (3) Each component of the nursing facility's allowable 
        appraised value prior to the total replacement project shall be 
        multiplied by the allocation ratio developed by dividing clause 
        (1) by clause (2). 
           In the case of either type of total replacement as 
        authorized under section 144A.071 or 144A.073, the provisions of 
        this subdivision shall also apply.  For purposes of the 
        moratorium exception authorized under section 144A.071, 
        subdivision 4a, paragraph (s), if the total replacement involves 
        the renovation and use of an existing health care facility 
        physical plant, the new allowable capital asset costs and 
        related debt and interest costs shall include first the 
        allowable capital asset costs and related debt and interest 
        costs of the renovation, to which shall be added the allowable 
        capital asset costs of the existing physical plant prior to the 
        renovation, and if reported by the facility, the related 
        allowable capital debt and interest costs. 
           (h) (g) Notwithstanding Minnesota Rules, part 9549.0060, 
        subpart 11, item C, subitem (2), for a total replacement, as 
        defined in paragraph (g) (f), authorized under section 144A.071 
        or 144A.073 after July 1, 1999, the replacement-costs-new per 
        bed limit shall be $74,280 per licensed bed in multiple-bed 
        rooms, $92,850 per licensed bed in semiprivate rooms with a 
        fixed partition separating the resident beds, and $111,420 per 
        licensed bed in single rooms.  Minnesota Rules, part 9549.0060, 
        subpart 11, item C, subitem (2), does not apply.  These amounts 
        must be adjusted annually as specified in subdivision 3f, 
        paragraph (a), beginning January 1, 2000.  
           (i) (h) For a total replacement, as defined in paragraph 
        (g) (f), authorized under section 144A.073 for a 96-bed nursing 
        home in Carlton county, the replacement-costs-new per bed limit 
        shall be $74,280 per licensed bed in multiple-bed rooms, $92,850 
        per licensed bed in semiprivate rooms with a fixed partition 
        separating the resident's beds, and $111,420 per licensed bed in 
        a single room.  Minnesota Rules, part 9549.0060, subpart 11, 
        item C, subitem (2), does not apply.  The resulting maximum 
        allowable replacement-costs-new multiplied by 1.25 shall 
        constitute the project's dollar threshold for purposes of 
        application of the limit set forth in section 144A.071, 
        subdivision 2.  The commissioner of health may waive the 
        requirements of section 144A.073, subdivision 3b, paragraph (b), 
        clause (2), on the condition that the other requirements of that 
        paragraph are met. 
           Sec. 8.  Minnesota Statutes 1998, section 256B.431, 
        subdivision 18, is amended to read: 
           Subd. 18.  [APPRAISALS; UPDATING APPRAISALS, ADDITIONS, AND 
        REPLACEMENTS.] (a) Notwithstanding Minnesota Rules, part 
        9549.0060, subparts 1 to 3, the appraised value, routine 
        updating of the appraised value, and special reappraisals are 
        subject to this subdivision. 
           (1) For rate years beginning after June 30, 1993, the 
        commissioner shall permit a nursing facility to appeal its 
        appraisal.  Any reappraisals conducted in connection with that 
        appeal must utilize the comparative-unit method as described in 
        the Marshall Valuation Service published by Marshall-Swift in 
        establishing the nursing facility's depreciated replacement cost.
           Nursing facilities electing to appeal their appraised value 
        shall file written notice of appeal with the commissioner of 
        human services before December 30, 1992.  The cost of the 
        reappraisal, if any, shall be considered an allowable cost under 
        Minnesota Rules, parts 9549.0040, subpart 9, and 9549.0061. 
           (2) The redetermination of a nursing facility's appraised 
        value under this paragraph shall have no impact on the rental 
        payment rate determined under subdivision 13 but shall only be 
        used for calculating the nursing facility's rental rate under 
        Minnesota Rules, parts 9549.0010 to 9549.0080, and this section 
        for rate years beginning after June 30, 1993.  
           (3) For all rate years after June 30, 1993, the 
        commissioner shall no longer conduct any appraisals under 
        Minnesota Rules, part 9549.0060, for the purpose of determining 
        property-related payment rates. 
           (b) Notwithstanding Minnesota Rules, part 9549.0060, 
        subpart 2, for rate years beginning after June 30, 1993, the 
        commissioner shall routinely update the appraised value of each 
        nursing facility by adding the cost of capital asset 
        acquisitions to its allowable appraised value.  
           The commissioner shall also annually index each nursing 
        facility's allowable appraised value by the inflation index 
        referenced in subdivision 3f, paragraph (a), for the purpose of 
        computing the nursing facility's annual rental rate.  In 
        annually adjusting the nursing facility's appraised value, the 
        commissioner must not include the historical cost of capital 
        assets acquired during the reporting year in the nursing 
        facility's appraised value. 
           In addition, the nursing facility's appraised value must be 
        reduced by the historical cost of capital asset disposals or 
        applicable credits such as public grants and insurance 
        proceeds.  Capital asset additions and disposals must be 
        reported on the nursing facility's annual cost report in the 
        reporting year of acquisition or disposal.  The incremental 
        increase in the nursing facility's rental rate resulting from 
        this annual adjustment as determined under Minnesota Rules, 
        parts 9549.0010 to 9549.0080, and this section shall be added to 
        the nursing facility's property-related payment rate for the 
        rate year following the reporting year.  
           Sec. 9.  Minnesota Statutes 1998, section 256B.431, 
        subdivision 21, is amended to read: 
           Subd. 21.  [INDEXING THRESHOLDS.] Beginning January 1, 
        1993, and each January 1 thereafter, the commissioner shall 
        annually update the dollar thresholds in subdivisions 15, 
        paragraph (d) (e), 16, and 17, and in section 144A.071, 
        subdivisions 2 and 4a, clauses (b) and (e), by the inflation 
        index referenced in subdivision 3f, paragraph (a). 
           Sec. 10.  Minnesota Statutes 1998, section 256B.431, 
        subdivision 22, is amended to read: 
           Subd. 22.  [CHANGES TO NURSING FACILITY REIMBURSEMENT.] The 
        nursing facility reimbursement changes in paragraphs (a) 
        to (e) (d) apply to Minnesota Rules, parts 9549.0010 to 
        9549.0080, and this section, and are effective for rate years 
        beginning on or after July 1, 1993, unless otherwise indicated. 
           (a) In addition to the approved pension or profit sharing 
        plans allowed by the reimbursement rule, the commissioner shall 
        allow those plans specified in Internal Revenue Code, sections 
        403(b) and 408(k). 
           (b) The commissioner shall allow as workers' compensation 
        insurance costs under section 256B.421, subdivision 14, the 
        costs of workers' compensation coverage obtained under the 
        following conditions: 
           (1) a plan approved by the commissioner of commerce as a 
        Minnesota group or individual self-insurance plan as provided in 
        section 79A.03; 
           (2) a plan in which: 
           (i) the nursing facility, directly or indirectly, purchases 
        workers' compensation coverage in compliance with section 
        176.181, subdivision 2, from an authorized insurance carrier; 
           (ii) a related organization to the nursing facility 
        reinsures the workers' compensation coverage purchased, directly 
        or indirectly, by the nursing facility; and 
           (iii) all of the conditions in clause (4) are met; 
           (3) a plan in which: 
           (i) the nursing facility, directly or indirectly, purchases 
        workers' compensation coverage in compliance with section 
        176.181, subdivision 2, from an authorized insurance carrier; 
           (ii) the insurance premium is calculated retrospectively, 
        including a maximum premium limit, and paid using the paid loss 
        retro method; and 
           (iii) all of the conditions in clause (4) are met; 
           (4) additional conditions are: 
           (i) the costs of the plan are allowable under the federal 
        Medicare program; 
           (ii) the reserves for the plan are maintained in an account 
        controlled and administered by a person which is not a related 
        organization to the nursing facility; 
           (iii) the reserves for the plan cannot be used, directly or 
        indirectly, as collateral for debts incurred or other 
        obligations of the nursing facility or related organizations to 
        the nursing facility; 
           (iv) if the plan provides workers' compensation coverage 
        for non-Minnesota nursing facilities, the plan's cost 
        methodology must be consistent among all nursing facilities 
        covered by the plan, and if reasonable, is allowed 
        notwithstanding any reimbursement laws regarding cost allocation 
        to the contrary; 
           (v) central, affiliated, corporate, or nursing facility 
        costs related to their administration of the plan are costs 
        which must remain in the nursing facility's administrative cost 
        category and must not be allocated to other cost categories; 
           (vi) required security deposits, whether in the form of 
        cash, investments, securities, assets, letters of credit, or in 
        any other form are not allowable costs for purposes of 
        establishing the facilities payment rate; and 
           (vii) for the rate year beginning on July 1, 1998, a group 
        of nursing facilities related by common ownership that 
        self-insures workers' compensation may allocate its directly 
        identified costs of self-insuring its Minnesota nursing facility 
        workers among those nursing facilities in the group that are 
        reimbursed under this section or section 256B.434.  The method 
        of cost allocation shall be based on the ratio of each nursing 
        facility's total allowable salaries and wages to that of the 
        nursing facility group's total allowable salaries and wages, 
        then similarly allocated within each nursing facility's 
        operating cost categories.  The costs associated with the 
        administration of the group's self-insurance plan must remain 
        classified in the nursing facility's administrative cost 
        category.  A written request of the nursing facility group's 
        election to use this alternate method of allocation of 
        self-insurance costs must be received by the commissioner no 
        later than May 1, 1998, to take effect July 1, 1998, or such 
        costs shall continue to be allocated under the existing cost 
        allocation methods.  Once a nursing facility group elects this 
        method of cost allocation for its workers' compensation 
        self-insurance costs, it shall remain in effect until such time 
        as the group no longer self-insures these costs; 
           (5) any costs allowed pursuant to clauses (1) to (3) are 
        subject to the following requirements: 
           (i) if the nursing facility is sold or otherwise ceases 
        operations, the plan's reserves must be subject to an 
        actuarially based settle-up after 36 months from the date of 
        sale or the date on which operations ceased.  The facility's 
        medical assistance portion of the total excess plan reserves 
        must be paid to the state within 30 days following the date on 
        which excess plan reserves are determined; 
           (ii) any distribution of excess plan reserves made to or 
        withdrawals made by the nursing facility or a related 
        organization are applicable credits and must be used to reduce 
        the nursing facility's workers' compensation insurance costs in 
        the reporting period in which a distribution or withdrawal is 
        received; 
           (iii) if reimbursement for the plan is sought under the 
        federal Medicare program, and is audited pursuant to the 
        Medicare program, the nursing facility must provide a copy of 
        Medicare's final audit report, including attachments and 
        exhibits, to the commissioner within 30 days of receipt by the 
        nursing facility or any related organization.  The commissioner 
        shall implement the audit findings associated with the plan upon 
        receipt of Medicare's final audit report.  The department's 
        authority to implement the audit findings is independent of its 
        authority to conduct a field audit. 
           (c) In the determination of incremental increases in the 
        nursing facility's rental rate as required in subdivisions 14 to 
        21, except for a refinancing permitted under subdivision 19, the 
        commissioner must adjust the nursing facility's property-related 
        payment rate for both incremental increases and decreases in 
        recomputations of its rental rate; 
           (d) A nursing facility's administrative cost limitation 
        must be modified as follows: 
           (1) if the nursing facility's licensed beds exceed 195 
        licensed beds, the general and administrative cost category 
        limitation shall be 13 percent; 
           (2) if the nursing facility's licensed beds are more than 
        150 licensed beds, but less than 196 licensed beds, the general 
        and administrative cost category limitation shall be 14 percent; 
        or 
           (3) if the nursing facility's licensed beds is less than 
        151 licensed beds, the general and administrative cost category 
        limitation shall remain at 15 percent. 
           (e) The care related operating rate shall be increased by 
        eight cents to reimburse facilities for unfunded federal 
        mandates, including costs related to hepatitis B vaccinations. 
           (f) For the rate year beginning on July 1, 1998, a group of 
        nursing facilities related by common ownership that self-insures 
        group health, dental, or life insurance may allocate its 
        directly identified costs of self-insuring its Minnesota nursing 
        facility workers among those nursing facilities in the group 
        that are reimbursed under this section or section 256B.434.  The 
        method of cost allocation shall be based on the ratio of each 
        nursing facility's total allowable salaries and wages to that of 
        the nursing facility group's total allowable salaries and wages, 
        then similarly allocated within each nursing facility's 
        operating cost categories.  The costs associated with the 
        administration of the group's self-insurance plan must remain 
        classified in the nursing facility's administrative cost 
        category.  A written request of the nursing facility group's 
        election to use this alternate method of allocation of 
        self-insurance costs must be received by the commissioner no 
        later than May 1, 1998, to take effect July 1, 1998, or those 
        self-insurance costs shall continue to be allocated under the 
        existing cost allocation methods.  Once a nursing facility group 
        elects this method of cost allocation for its group health, 
        dental, or life insurance self-insurance costs, it shall remain 
        in effect until such time as the group no longer self-insures 
        these costs. 
           Sec. 11.  Minnesota Statutes 1998, section 256B.431, 
        subdivision 25, is amended to read: 
           Subd. 25.  [CHANGES TO NURSING FACILITY REIMBURSEMENT 
        BEGINNING JULY 1, 1995.] The nursing facility reimbursement 
        changes in paragraphs (a) to (g) shall apply in the sequence 
        specified to Minnesota Rules, parts 9549.0010 to 9549.0080, and 
        this section, beginning July 1, 1995. 
           (a) The eight-cent adjustment to care-related rates in 
        subdivision 22, paragraph (e), shall no longer apply. 
           (b) For rate years beginning on or after July 1, 1995, the 
        commissioner shall limit a nursing facility's allowable 
        operating per diem for each case mix category for each rate year 
        as in clauses (1) to (3). 
           (1) For the rate year beginning July 1, 1995, the 
        commissioner shall group nursing facilities into two groups, 
        freestanding and nonfreestanding, within each geographic group, 
        using their operating cost per diem for the case mix A 
        classification.  A nonfreestanding nursing facility is a nursing 
        facility whose other operating cost per diem is subject to the 
        hospital attached, short length of stay, or the rule 80 limits.  
        All other nursing facilities shall be considered freestanding 
        nursing facilities.  The commissioner shall then array all 
        nursing facilities in each grouping by their allowable case mix 
        A operating cost per diem.  In calculating a nursing facility's 
        operating cost per diem for this purpose, the commissioner shall 
        exclude the raw food cost per diem related to providing special 
        diets that are based on religious beliefs, as determined in 
        subdivision 2b, paragraph (h).  For those nursing facilities in 
        each grouping whose case mix A operating cost per diem: 
           (i) is at or below the median minus 1.0 standard deviation 
        of the array, the commissioner shall limit the nursing 
        facility's allowable operating cost per diem for each case mix 
        category to the lesser of the prior reporting year's allowable 
        operating cost per diems plus the inflation factor as 
        established in paragraph (f), clause (2), increased by six 
        percentage points, or the current reporting year's corresponding 
        allowable operating cost per diem; 
           (ii) is between minus .5 standard deviation and minus 1.0 
        standard deviation below the median of the array, the 
        commissioner shall limit the nursing facility's allowable 
        operating cost per diem for each case mix category to the lesser 
        of the prior reporting year's allowable operating cost per diems 
        plus the inflation factor as established in paragraph (f), 
        clause (2), increased by four percentage points, or the current 
        reporting year's corresponding allowable operating cost per 
        diem; or 
           (iii) is equal to or above minus .5 standard deviation 
        below the median of the array, the commissioner shall limit the 
        nursing facility's allowable operating cost per diem for each 
        case mix category to the lesser of the prior reporting year's 
        allowable operating cost per diems plus the inflation factor as 
        established in paragraph (f), clause (2), increased by three 
        percentage points, or the current reporting year's corresponding 
        allowable operating cost per diem. 
           (2) For the rate year beginning on July 1, 1996, the 
        commissioner shall limit the nursing facility's allowable 
        operating cost per diem for each case mix category to the lesser 
        of the prior reporting year's allowable operating cost per diems 
        plus the inflation factor as established in paragraph (f), 
        clause (2), increased by one percentage point or the current 
        reporting year's corresponding allowable operating cost per 
        diems; and 
           (3) For rate years beginning on or after July 1, 1997, the 
        commissioner shall limit the nursing facility's allowable 
        operating cost per diem for each case mix category to the lesser 
        of the reporting year prior to the current reporting year's 
        allowable operating cost per diems plus the inflation factor as 
        established in paragraph (f), clause (2), or the current 
        reporting year's corresponding allowable operating cost per 
        diems. 
           (c) For rate years beginning on July 1, 1995, the 
        commissioner shall limit the allowable operating cost per diems 
        for high cost nursing facilities.  After application of the 
        limits in paragraph (b) to each nursing facility's operating 
        cost per diems, the commissioner shall group nursing facilities 
        into two groups, freestanding or nonfreestanding, within each 
        geographic group.  A nonfreestanding nursing facility is a 
        nursing facility whose other operating cost per diems are 
        subject to hospital attached, short length of stay, or rule 80 
        limits.  All other nursing facilities shall be considered 
        freestanding nursing facilities.  The commissioner shall then 
        array all nursing facilities within each grouping by their 
        allowable case mix A operating cost per diems.  In calculating a 
        nursing facility's operating cost per diem for this purpose, the 
        commissioner shall exclude the raw food cost per diem related to 
        providing special diets that are based on religious beliefs, as 
        determined in subdivision 2b, paragraph (h).  For those nursing 
        facilities in each grouping whose case mix A operating cost per 
        diem exceeds 1.0 standard deviation above the median, the 
        commissioner shall reduce their allowable operating cost per 
        diems by two percent.  For those nursing facilities in each 
        grouping whose case mix A operating cost per diem exceeds 0.5 
        standard deviation above the median but is less than or equal to 
        1.0 standard deviation above the median, the commissioner shall 
        reduce their allowable operating cost per diems by one percent. 
           (d) For rate years beginning on or after July 1, 1996, the 
        commissioner shall limit the allowable operating cost per diems 
        for high cost nursing facilities.  After application of the 
        limits in paragraph (b) to each nursing facility's operating 
        cost per diems, the commissioner shall group nursing facilities 
        into two groups, freestanding or nonfreestanding, within each 
        geographic group.  A nonfreestanding nursing facility is a 
        nursing facility whose other operating cost per diems are 
        subject to hospital attached, short length of stay, or rule 80 
        limits.  All other nursing facilities shall be considered 
        freestanding nursing facilities.  The commissioner shall then 
        array all nursing facilities within each grouping by their 
        allowable case mix A operating cost per diems.  In calculating a 
        nursing facility's operating cost per diem for this purpose, the 
        commissioner shall exclude the raw food cost per diem related to 
        providing special diets that are based on religious beliefs, as 
        determined in subdivision 2b, paragraph (h).  In those nursing 
        facilities in each grouping whose case mix A operating cost per 
        diem exceeds 1.0 standard deviation above the median, the 
        commissioner shall reduce their allowable operating cost per 
        diems by three percent.  For those nursing facilities in each 
        grouping whose case mix A operating cost per diem exceeds 0.5 
        standard deviation above the median but is less than or equal to 
        1.0 standard deviation above the median, the commissioner shall 
        reduce their allowable operating cost per diems by two percent. 
           (e) For rate years beginning on or after July 1, 1995, the 
        commissioner shall determine a nursing facility's efficiency 
        incentive by first computing the allowable difference, which is 
        the lesser of $4.50 or the amount by which the facility's other 
        operating cost limit exceeds its nonadjusted other operating 
        cost per diem for that rate year.  The commissioner shall 
        compute the efficiency incentive by: 
           (1) subtracting the allowable difference from $4.50 and 
        dividing the result by $4.50; 
           (2) multiplying 0.20 by the ratio resulting from clause 
        (1), and then; 
           (3) adding 0.50 to the result from clause (2); and 
           (4) multiplying the result from clause (3) times the 
        allowable difference. 
           The nursing facility's efficiency incentive payment shall 
        be the lesser of $2.25 or the product obtained in clause (4). 
           (f) For rate years beginning on or after July 1, 1995, the 
        forecasted price index for a nursing facility's allowable 
        operating cost per diems shall be determined under clauses (1) 
        to (3) using the change in the Consumer Price Index-All Items 
        (United States city average) (CPI-U) or the change in the 
        Nursing Home Market Basket, both as forecasted by Data Resources 
        Inc., whichever is applicable.  The commissioner shall use the 
        indices as forecasted in the fourth quarter of the calendar year 
        preceding the rate year, subject to subdivision 2l, paragraph 
        (c).  If, as a result of federal legislative or administrative 
        action, the methodology used to calculate the Consumer Price 
        Index-All Items (United States city average) (CPI-U) changes, 
        the commissioner shall develop a conversion factor or other 
        methodology to convert the CPI-U index factor that results from 
        the new methodology to an index factor that approximates, as 
        closely as possible, the index factor that would have resulted 
        from application of the original CPI-U methodology prior to any 
        changes in methodology.  The commissioner shall use the 
        conversion factor or other methodology to calculate an adjusted 
        inflation index.  The adjusted inflation index must be used to 
        calculate payment rates under this section instead of the CPI-U 
        index specified in paragraph (d).  If the commissioner is 
        required to develop an adjusted inflation index, the 
        commissioner shall report to the legislature as part of the next 
        budget submission the fiscal impact of applying this index. 
           (1) The CPI-U forecasted index for allowable operating cost 
        per diems shall be based on the 21-month period from the 
        midpoint of the nursing facility's reporting year to the 
        midpoint of the rate year following the reporting year. 
           (2) The Nursing Home Market Basket forecasted index for 
        allowable operating costs and per diem limits shall be based on 
        the 12-month period between the midpoints of the two reporting 
        years preceding the rate year. 
           (3) For rate years beginning on or after July 1, 1996, the 
        forecasted index for operating cost limits referred to in 
        subdivision 21, paragraph (b), shall be based on the CPI-U for 
        the 12-month period between the midpoints of the two reporting 
        years preceding the rate year. 
           (g) After applying these provisions for the respective rate 
        years, the commissioner shall index these allowable operating 
        costs per diems by the inflation factor provided for in 
        paragraph (f), clause (1), and add the nursing facility's 
        efficiency incentive as computed in paragraph (e). 
           (h)(1) A nursing facility licensed for 302 beds on 
        September 30, 1993, that was approved under the moratorium 
        exception process in section 144A.073 for a partial replacement, 
        and completed the replacement project in December 1994, is 
        exempt from Minnesota Statutes 1998, section 256B.431, 
        subdivision 25, paragraphs (b) to (d) for rate years beginning 
        on or after July 1, 1995. 
           (2) For the rate year beginning July 1, 1997, after 
        computing this nursing facility's payment rate according to 
        section 256B.434, the commissioner shall make a one-year rate 
        adjustment of $8.62 to the facility's contract payment rate for 
        the rate effect of operating cost changes associated with the 
        facility's 1994 downsizing project. 
           (3) For rate years beginning on or after July 1, 1997, the 
        commissioner shall add 35 cents to the facility's base property 
        related payment rate for the rate effect of reducing its 
        licensed capacity to 290 beds from 302 beds and shall add 83 
        cents to the facility's real estate tax and special assessment 
        payment rate for payments in lieu of real estate taxes.  The 
        adjustments in this clause shall remain in effect for the 
        duration of the facility's contract under section 256B.434. 
           (i) Notwithstanding Laws 1996, chapter 451, article 3, 
        section 11, paragraph (h), for the rate years beginning on July 
        1, 1996, July 1, 1997, and July 1, 1998, a nursing facility 
        licensed for 40 beds effective May 1, 1992, with a subsequent 
        increase of 20 Medicare/Medicaid certified beds, effective 
        January 26, 1993, in accordance with an increase in licensure is 
        exempt from paragraphs (b) to (d). 
           Sec. 12.  Minnesota Statutes 1999 Supplement, section 
        256B.431, subdivision 26, is amended to read: 
           Subd. 26.  [CHANGES TO NURSING FACILITY REIMBURSEMENT 
        BEGINNING JULY 1, 1997.] The nursing facility reimbursement 
        changes in paragraphs (a) to (f) (e) shall apply in the sequence 
        specified in Minnesota Rules, parts 9549.0010 to 9549.0080, and 
        this section, beginning July 1, 1997. 
           (a) For rate years beginning on or after July 1, 1997, the 
        commissioner shall limit a nursing facility's allowable 
        operating per diem for each case mix category for each rate year.
        The commissioner shall group nursing facilities into two groups, 
        freestanding and nonfreestanding, within each geographic group, 
        using their operating cost per diem for the case mix A 
        classification.  A nonfreestanding nursing facility is a nursing 
        facility whose other operating cost per diem is subject to the 
        hospital attached, short length of stay, or the rule 80 limits.  
        All other nursing facilities shall be considered freestanding 
        nursing facilities.  The commissioner shall then array all 
        nursing facilities in each grouping by their allowable case mix 
        A operating cost per diem.  In calculating a nursing facility's 
        operating cost per diem for this purpose, the commissioner shall 
        exclude the raw food cost per diem related to providing special 
        diets that are based on religious beliefs, as determined in 
        subdivision 2b, paragraph (h).  For those nursing facilities in 
        each grouping whose case mix A operating cost per diem: 
           (1) is at or below the median of the array, the 
        commissioner shall limit the nursing facility's allowable 
        operating cost per diem for each case mix category to the lesser 
        of the prior reporting year's allowable operating cost per diem 
        as specified in Laws 1996, chapter 451, article 3, section 11, 
        paragraph (h), plus the inflation factor as established in 
        paragraph (d), clause (2), increased by two percentage points, 
        or the current reporting year's corresponding allowable 
        operating cost per diem; or 
           (2) is above the median of the array, the commissioner 
        shall limit the nursing facility's allowable operating cost per 
        diem for each case mix category to the lesser of the prior 
        reporting year's allowable operating cost per diem as specified 
        in Laws 1996, chapter 451, article 3, section 11, paragraph (h), 
        plus the inflation factor as established in paragraph (d), 
        clause (2), increased by one percentage point, or the current 
        reporting year's corresponding allowable operating cost per diem.
           For purposes of paragraph (a), if a nursing facility 
        reports on its cost report a reduction in cost due to a refund 
        or credit for a rate year beginning on or after July 1, 1998, 
        the commissioner shall increase that facility's spend-up limit 
        for the rate year following the current rate year by the amount 
        of the cost reduction divided by its resident days for the 
        reporting year preceding the rate year in which the adjustment 
        is to be made. 
           (b) For rate years beginning on or after July 1, 1997, the 
        commissioner shall limit the allowable operating cost per diem 
        for high cost nursing facilities.  After application of the 
        limits in paragraph (a) to each nursing facility's operating 
        cost per diem, the commissioner shall group nursing facilities 
        into two groups, freestanding or nonfreestanding, within each 
        geographic group.  A nonfreestanding nursing facility is a 
        nursing facility whose other operating cost per diem are subject 
        to hospital attached, short length of stay, or rule 80 limits.  
        All other nursing facilities shall be considered freestanding 
        nursing facilities.  The commissioner shall then array all 
        nursing facilities within each grouping by their allowable case 
        mix A operating cost per diem.  In calculating a nursing 
        facility's operating cost per diem for this purpose, the 
        commissioner shall exclude the raw food cost per diem related to 
        providing special diets that are based on religious beliefs, as 
        determined in subdivision 2b, paragraph (h).  For those nursing 
        facilities in each grouping whose case mix A operating cost per 
        diem exceeds 1.0 standard deviation above the median, the 
        commissioner shall reduce their allowable operating cost per 
        diem by three percent.  For those nursing facilities in each 
        grouping whose case mix A operating cost per diem exceeds 0.5 
        standard deviation above the median but is less than or equal to 
        1.0 standard deviation above the median, the commissioner shall 
        reduce their allowable operating cost per diem by two percent.  
        However, in no case shall a nursing facility's operating cost 
        per diem be reduced below its grouping's limit established at 
        0.5 standard deviations above the median. 
           (c) For rate years beginning on or after July 1, 1997, the 
        commissioner shall determine a nursing facility's efficiency 
        incentive by first computing the allowable difference, which is 
        the lesser of $4.50 or the amount by which the facility's other 
        operating cost limit exceeds its nonadjusted other operating 
        cost per diem for that rate year.  The commissioner shall 
        compute the efficiency incentive by: 
           (1) subtracting the allowable difference from $4.50 and 
        dividing the result by $4.50; 
           (2) multiplying 0.20 by the ratio resulting from clause 
        (1), and then; 
           (3) adding 0.50 to the result from clause (2); and 
           (4) multiplying the result from clause (3) times the 
        allowable difference. 
           The nursing facility's efficiency incentive payment shall 
        be the lesser of $2.25 or the product obtained in clause (4). 
           (d) For rate years beginning on or after July 1, 1997, the 
        forecasted price index for a nursing facility's allowable 
        operating cost per diem shall be determined under clauses (1) 
        and (2) using the change in the Consumer Price Index-All Items 
        (United States city average) (CPI-U) as forecasted by Data 
        Resources, Inc.  The commissioner shall use the indices as 
        forecasted in the fourth quarter of the calendar year preceding 
        the rate year, subject to subdivision 2l, paragraph (c).  
           (1) The CPI-U forecasted index for allowable operating cost 
        per diem shall be based on the 21-month period from the midpoint 
        of the nursing facility's reporting year to the midpoint of the 
        rate year following the reporting year. 
           (2) For rate years beginning on or after July 1, 1997, the 
        forecasted index for operating cost limits referred to in 
        subdivision 21, paragraph (b), shall be based on the CPI-U for 
        the 12-month period between the midpoints of the two reporting 
        years preceding the rate year. 
           (e) After applying these provisions for the respective rate 
        years, the commissioner shall index these allowable operating 
        cost per diem by the inflation factor provided for in paragraph 
        (d), clause (1), and add the nursing facility's efficiency 
        incentive as computed in paragraph (c). 
           (f) For rate years beginning on or after July 1, 1997, the 
        total operating cost payment rates for a nursing facility shall 
        be the greater of the total operating cost payment rates 
        determined under this section or the total operating cost 
        payment rates in effect on June 30, 1997, subject to rate 
        adjustments due to field audit or rate appeal resolution.  This 
        provision shall not apply to subsequent field audit adjustments 
        of the nursing facility's operating cost rates for rate years 
        beginning on or after July 1, 1997. 
           (g) (f) For the rate years beginning on July 1, 1997, July 
        1, 1998, and July 1, 1999, a nursing facility licensed for 40 
        beds effective May 1, 1992, with a subsequent increase of 20 
        Medicare/Medicaid certified beds, effective January 26, 1993, in 
        accordance with an increase in licensure is exempt from 
        paragraphs (a) and (b). 
           (h) (g) For a nursing facility whose construction project 
        was authorized according to section 144A.073, subdivision 5, 
        paragraph (g), the operating cost payment rates for the new 
        location shall be determined based on Minnesota Rules, part 
        9549.0057.  The relocation allowed under section 144A.073, 
        subdivision 5, paragraph (g), and the rate determination allowed 
        under this paragraph must meet the cost neutrality requirements 
        of section 144A.073, subdivision 3c.  Paragraphs (a) and (b) 
        shall not apply until the second rate year after the settle-up 
        cost report is filed.  Notwithstanding subdivision 2b, paragraph 
        (g), real estate taxes and special assessments payable by the 
        new location, a 501(c)(3) nonprofit corporation, shall be 
        included in the payment rates determined under this subdivision 
        for all subsequent rate years. 
           (i) (h) For the rate year beginning July 1, 1997, the 
        commissioner shall compute the payment rate for a nursing 
        facility licensed for 94 beds on September 30, 1996, that 
        applied in October 1993 for approval of a total replacement 
        under the moratorium exception process in section 144A.073, and 
        completed the approved replacement in June 1995, with other 
        operating cost spend-up limit under paragraph (a), increased by 
        $3.98, and after computing the facility's payment rate according 
        to this section, the commissioner shall make a one-year positive 
        rate adjustment of $3.19 for operating costs related to the 
        newly constructed total replacement, without application of 
        paragraphs (a) and (b).  The facility's per diem, before the 
        $3.19 adjustment, shall be used as the prior reporting year's 
        allowable operating cost per diem for payment rate calculation 
        for the rate year beginning July 1, 1998.  A facility described 
        in this paragraph is exempt from paragraph (b) for the rate 
        years beginning July 1, 1997, and July 1, 1998. 
           (j) (i) For the purpose of applying the limit stated in 
        paragraph (a), a nursing facility in Kandiyohi county licensed 
        for 86 beds that was granted hospital-attached status on 
        December 1, 1994, shall have the prior year's allowable 
        care-related per diem increased by $3.207 and the prior year's 
        other operating cost per diem increased by $4.777 before adding 
        the inflation in paragraph (d), clause (2), for the rate year 
        beginning on July 1, 1997. 
           (k) (j) For the purpose of applying the limit stated in 
        paragraph (a), a 117 bed nursing facility located in Pine county 
        shall have the prior year's allowable other operating cost per 
        diem increased by $1.50 before adding the inflation in paragraph 
        (d), clause (2), for the rate year beginning on July 1, 1997. 
           (l) (k) For the purpose of applying the limit under 
        paragraph (a), a nursing facility in Hibbing licensed for 192 
        beds shall have the prior year's allowable other operating cost 
        per diem increased by $2.67 before adding the inflation in 
        paragraph (d), clause (2), for the rate year beginning July 1, 
        1997. 
           Sec. 13.  Minnesota Statutes 1999 Supplement, section 
        256B.434, subdivision 3, is amended to read: 
           Subd. 3.  [DURATION AND TERMINATION OF CONTRACTS.] (a) 
        Subject to available resources, the commissioner may begin to 
        execute contracts with nursing facilities November 1, 1995. 
           (b) All contracts entered into under this section are for a 
        term of one year.  Either party may terminate a contract at any 
        time without cause by providing 90 calendar days advance written 
        notice to the other party.  The decision to terminate a contract 
        is not appealable.  Notwithstanding section 16C.05, subdivision 
        2, paragraph (a), clause (5), the contract shall be renegotiated 
        for additional one-year terms, unless either party provides 
        written notice of termination.  The provisions of the contract 
        shall be renegotiated annually by the parties prior to the 
        expiration date of the contract.  The parties may voluntarily 
        renegotiate the terms of the contract at any time by mutual 
        agreement. 
           (c) If a nursing facility fails to comply with the terms of 
        a contract, the commissioner shall provide reasonable notice 
        regarding the breach of contract and a reasonable opportunity 
        for the facility to come into compliance.  If the facility fails 
        to come into compliance or to remain in compliance, the 
        commissioner may terminate the contract.  If a contract is 
        terminated, the contract payment remains in effect for the 
        remainder of the rate year in which the contract was terminated, 
        but in all other respects the provisions of this section do not 
        apply to that facility effective the date the contract is 
        terminated.  The contract shall contain a provision governing 
        the transition back to the cost-based reimbursement system 
        established under section 256B.431, subdivision 25, and 
        Minnesota Rules, parts 9549.0010 to 9549.0080.  A contract 
        entered into under this section may be amended by mutual 
        agreement of the parties. 
           Sec. 14.  Minnesota Statutes 1999 Supplement, section 
        256B.434, subdivision 4, is amended to read: 
           Subd. 4.  [ALTERNATE RATES FOR NURSING FACILITIES.] (a) For 
        nursing facilities which have their payment rates determined 
        under this section rather than section 256B.431, subdivision 25, 
        the commissioner shall establish a rate under this subdivision.  
        The nursing facility must enter into a written contract with the 
        commissioner. 
           (b) A nursing facility's case mix payment rate for the 
        first rate year of a facility's contract under this section is 
        the payment rate the facility would have received under section 
        256B.431, subdivision 25. 
           (c) A nursing facility's case mix payment rates for the 
        second and subsequent years of a facility's contract under this 
        section are the previous rate year's contract payment rates plus 
        an inflation adjustment.  The index for the inflation adjustment 
        must be based on the change in the Consumer Price Index-All 
        Items (United States City average) (CPI-U) forecasted by Data 
        Resources, Inc., as forecasted in the fourth quarter of the 
        calendar year preceding the rate year.  The inflation adjustment 
        must be based on the 12-month period from the midpoint of the 
        previous rate year to the midpoint of the rate year for which 
        the rate is being determined.  For the rate years beginning on 
        July 1, 1999, and July 1, 2000, this paragraph shall apply only 
        to the property-related payment rate.  In determining the amount 
        of the property-related payment rate adjustment under this 
        paragraph, the commissioner shall determine the proportion of 
        the facility's rates that are property-related based on the 
        facility's most recent cost report. 
           (d) The commissioner shall develop additional 
        incentive-based payments of up to five percent above the 
        standard contract rate for achieving outcomes specified in each 
        contract.  The specified facility-specific outcomes must be 
        measurable and approved by the commissioner.  The commissioner 
        may establish, for each contract, various levels of achievement 
        within an outcome.  After the outcomes have been specified the 
        commissioner shall assign various levels of payment associated 
        with achieving the outcome.  Any incentive-based payment cancels 
        if there is a termination of the contract.  In establishing the 
        specified outcomes and related criteria the commissioner shall 
        consider the following state policy objectives: 
           (1) improved cost effectiveness and quality of life as 
        measured by improved clinical outcomes; 
           (2) successful diversion or discharge to community 
        alternatives; 
           (3) decreased acute care costs; 
           (4) improved consumer satisfaction; 
           (5) the achievement of quality; or 
           (6) any additional outcomes proposed by a nursing facility 
        that the commissioner finds desirable. 
           Sec. 15.  [REPEALER.] 
           Minnesota Statutes 1998, sections 256B.03, subdivision 2; 
        256B.431, subdivisions 2, 2a, 2f, 2h, 2m, 2p, 2q, 3, 3b, 3d, 3h, 
        3j, 4, 5, 7, 8, 9, 9a, 12, and 24; 256B.48, subdivision 9; 
        256B.50, subdivision 3; and 256B.74, subdivision 3, are repealed 
        effective July 1, 2000. 
           Sec. 16.  [REVISOR INSTRUCTIONS.] 
           In the next and subsequent editions of Minnesota Statutes 
        and Minnesota Rules, the revisor of statutes shall make any 
        necessary statutory cross-reference changes required as a result 
        of the provisions in this bill. 
           Sec. 17.  [EFFECTIVE DATE.] 
           The amendment in section 1 to Minnesota Statutes, section 
        256B.0913, subdivision 5, paragraph (g), is effective July 1, 
        2000, or upon federal approval of amendments to Minnesota's home 
        and community-based waiver for elderly persons at risk of 
        nursing home level of care, health care financing administration 
        control number 0025.91.R3, whichever occurs later.  The 
        remainder of section 1, and sections 2 to 15 are effective July 
        1, 2000. 
           Presented to the governor April 27, 2000 
           Signed by the governor May 1, 2000, 2:45 p.m.