1.1                          A bill for an act 
  1.2             relating to human services; modifying provisions in 
  1.3             long-term care; amending Minnesota Statutes 1998, 
  1.4             sections 256B.411, subdivision 2; and 256B.431, 
  1.5             subdivisions 1, 3a, 10, 16, 18, 21, 22, and 25; 
  1.6             Minnesota Statutes 1999 Supplement, sections 
  1.7             256B.0913, subdivision 5; 256B.431, subdivisions 17 
  1.8             and 26; and 256B.434, subdivisions 3 and 4; repealing 
  1.9             Minnesota Statutes 1998, sections 256B.03, subdivision 
  1.10            2; 256B.431, subdivisions 2, 2a, 2f, 2h, 2m, 2p, 2q, 
  1.11            3, 3b, 3d, 3h, 3j, 4, 5, 7, 8, 9, 9a, 12, and 24; 
  1.12            256B.48, subdivision 9; 256B.50, subdivision 3; and 
  1.13            256B.74, subdivision 3. 
  1.14  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.15     Section 1.  Minnesota Statutes 1999 Supplement, section 
  1.16  256B.0913, subdivision 5, is amended to read: 
  1.17     Subd. 5.  [SERVICES COVERED UNDER ALTERNATIVE CARE.] (a) 
  1.18  Alternative care funding may be used for payment of costs of: 
  1.19     (1) adult foster care; 
  1.20     (2) adult day care; 
  1.21     (3) home health aide; 
  1.22     (4) homemaker services; 
  1.23     (5) personal care; 
  1.24     (6) case management; 
  1.25     (7) respite care; 
  1.26     (8) assisted living; 
  1.27     (9) residential care services; 
  1.28     (10) care-related supplies and equipment; 
  1.29     (11) meals delivered to the home; 
  2.1      (12) transportation; 
  2.2      (13) skilled nursing; 
  2.3      (14) chore services; 
  2.4      (15) companion services; 
  2.5      (16) nutrition services; 
  2.6      (17) training for direct informal caregivers; 
  2.7      (18) telemedicine devices to monitor recipients in their 
  2.8   own homes as an alternative to hospital care, nursing home care, 
  2.9   or home visits; and 
  2.10     (19) other services including direct cash payments to 
  2.11  clients, approved by the county agency, subject to the 
  2.12  provisions of paragraph (m).  Total annual payments for other 
  2.13  services for all clients within a county may not exceed either 
  2.14  ten percent of that county's annual alternative care program 
  2.15  base allocation or $5,000, whichever is greater.  In no case 
  2.16  shall this amount exceed the county's total annual alternative 
  2.17  care program base allocation. 
  2.18     (b) The county agency must ensure that the funds are used 
  2.19  only to supplement and not supplant services available through 
  2.20  other public assistance or services programs. 
  2.21     (c) Unless specified in statute, the service standards for 
  2.22  alternative care services shall be the same as the service 
  2.23  standards defined in the elderly waiver.  Except for the county 
  2.24  agencies' approval of direct cash payments to clients, persons 
  2.25  or agencies must be employed by or under a contract with the 
  2.26  county agency or the public health nursing agency of the local 
  2.27  board of health in order to receive funding under the 
  2.28  alternative care program. 
  2.29     (d) The adult foster care rate shall be considered a 
  2.30  difficulty of care payment and shall not include room and 
  2.31  board.  The adult foster care daily rate shall be negotiated 
  2.32  between the county agency and the foster care provider.  The 
  2.33  rate established under this section shall not exceed 75 percent 
  2.34  of the state average monthly nursing home payment for the case 
  2.35  mix classification to which the individual receiving foster care 
  2.36  is assigned, and it must allow for other alternative care 
  3.1   services to be authorized by the case manager. 
  3.2      (e) Personal care services may be provided by a personal 
  3.3   care provider organization.  A county agency may contract with a 
  3.4   relative of the client to provide personal care services, but 
  3.5   must ensure nursing supervision.  Covered personal care services 
  3.6   defined in section 256B.0627, subdivision 4, must meet 
  3.7   applicable standards in Minnesota Rules, part 9505.0335. 
  3.8      (f) A county may use alternative care funds to purchase 
  3.9   medical supplies and equipment without prior approval from the 
  3.10  commissioner when:  (1) there is no other funding source; (2) 
  3.11  the supplies and equipment are specified in the individual's 
  3.12  care plan as medically necessary to enable the individual to 
  3.13  remain in the community according to the criteria in Minnesota 
  3.14  Rules, part 9505.0210, item A; and (3) the supplies and 
  3.15  equipment represent an effective and appropriate use of 
  3.16  alternative care funds.  A county may use alternative care funds 
  3.17  to purchase supplies and equipment from a non-Medicaid certified 
  3.18  vendor if the cost for the items is less than that of a Medicaid 
  3.19  vendor.  A county is not required to contract with a provider of 
  3.20  supplies and equipment if the monthly cost of the supplies and 
  3.21  equipment is less than $250.  
  3.22     (g) For purposes of this section, residential care services 
  3.23  are services which are provided to individuals living in 
  3.24  residential care homes.  Residential care homes are currently 
  3.25  licensed as board and lodging establishments and are registered 
  3.26  with the department of health as providing special services.  
  3.27  Residential care services are defined as "supportive services" 
  3.28  and "health-related services."  "Supportive services" means the 
  3.29  provision of up to 24-hour supervision and oversight.  
  3.30  Supportive services includes:  (1) transportation, when provided 
  3.31  by the residential care center only; (2) socialization, when 
  3.32  socialization is part of the plan of care, has specific goals 
  3.33  and outcomes established, and is not diversional or recreational 
  3.34  in nature; (3) assisting clients in setting up meetings and 
  3.35  appointments; (4) assisting clients in setting up medical and 
  3.36  social services; (5) providing assistance with personal laundry, 
  4.1   such as carrying the client's laundry to the laundry room.  
  4.2   Assistance with personal laundry does not include any laundry, 
  4.3   such as bed linen, that is included in the room and board rate.  
  4.4   Health-related services are limited to minimal assistance with 
  4.5   dressing, grooming, and bathing and providing reminders to 
  4.6   residents to take medications that are self-administered or 
  4.7   providing storage for medications, if requested.  Individuals 
  4.8   receiving residential care services cannot receive ~~both personal~~ 
  4.9   ~~care services and residential care~~ homemaking services.  
  4.10     (h) For the purposes of this section, "assisted living" 
  4.11  refers to supportive services provided by a single vendor to 
  4.12  clients who reside in the same apartment building of three or 
  4.13  more units which are not subject to registration under chapter 
  4.14  144D.  Assisted living services are defined as up to 24-hour 
  4.15  supervision, and oversight, supportive services as defined in 
  4.16  clause (1), individualized home care aide tasks as defined in 
  4.17  clause (2), and individualized home management tasks as defined 
  4.18  in clause (3) provided to residents of a residential center 
  4.19  living in their units or apartments with a full kitchen and 
  4.20  bathroom.  A full kitchen includes a stove, oven, refrigerator, 
  4.21  food preparation counter space, and a kitchen utensil storage 
  4.22  compartment.  Assisted living services must be provided by the 
  4.23  management of the residential center or by providers under 
  4.24  contract with the management or with the county. 
  4.25     (1) Supportive services include:  
  4.26     (i) socialization, when socialization is part of the plan 
  4.27  of care, has specific goals and outcomes established, and is not 
  4.28  diversional or recreational in nature; 
  4.29     (ii) assisting clients in setting up meetings and 
  4.30  appointments; and 
  4.31     (iii) providing transportation, when provided by the 
  4.32  residential center only.  
  4.33     Individuals receiving assisted living services will not 
  4.34  receive both assisted living services and homemaking ~~or personal~~ 
  4.35  ~~care~~ services.  Individualized means services are chosen and 
  4.36  designed specifically for each resident's needs, rather than 
  5.1   provided or offered to all residents regardless of their 
  5.2   illnesses, disabilities, or physical conditions.  
  5.3      (2) Home care aide tasks means:  
  5.4      (i) preparing modified diets, such as diabetic or low 
  5.5   sodium diets; 
  5.6      (ii) reminding residents to take regularly scheduled 
  5.7   medications or to perform exercises; 
  5.8      (iii) household chores in the presence of technically 
  5.9   sophisticated medical equipment or episodes of acute illness or 
  5.10  infectious disease; 
  5.11     (iv) household chores when the resident's care requires the 
  5.12  prevention of exposure to infectious disease or containment of 
  5.13  infectious disease; and 
  5.14     (v) assisting with dressing, oral hygiene, hair care, 
  5.15  grooming, and bathing, if the resident is ambulatory, and if the 
  5.16  resident has no serious acute illness or infectious disease.  
  5.17  Oral hygiene means care of teeth, gums, and oral prosthetic 
  5.18  devices.  
  5.19     (3) Home management tasks means:  
  5.20     (i) housekeeping; 
  5.21     (ii) laundry; 
  5.22     (iii) preparation of regular snacks and meals; and 
  5.23     (iv) shopping.  
  5.24     Assisted living services as defined in this section shall 
  5.25  not be authorized in boarding and lodging establishments 
  5.26  licensed according to sections 157.011 and 157.15 to 157.22. 
  5.27     (i) For establishments registered under chapter 144D, 
  5.28  assisted living services under this section means the services 
  5.29  described and licensed under section 144A.4605. 
  5.30     (j) For the purposes of this section, reimbursement for 
  5.31  assisted living services and residential care services shall be 
  5.32  a monthly rate negotiated and authorized by the county agency 
  5.33  based on an individualized service plan for each resident.  The 
  5.34  rate shall not exceed the nonfederal share of the greater of 
  5.35  either the statewide or any of the geographic groups' weighted 
  5.36  average monthly medical assistance nursing facility payment rate 
  6.1   of the case mix resident class to which the 180-day eligible 
  6.2   client would be assigned under Minnesota Rules, parts 9549.0050 
  6.3   to 9549.0059, unless the services are provided by a home care 
  6.4   provider licensed by the department of health and are provided 
  6.5   in a building that is registered as a housing with services 
  6.6   establishment under chapter 144D and that provides 24-hour 
  6.7   supervision. 
  6.8      (k) For purposes of this section, companion services are 
  6.9   defined as nonmedical care, supervision and oversight, provided 
  6.10  to a functionally impaired adult.  Companions may assist the 
  6.11  individual with such tasks as meal preparation, laundry and 
  6.12  shopping, but do not perform these activities as discrete 
  6.13  services.  The provision of companion services does not entail 
  6.14  hands-on medical care.  Providers may also perform light 
  6.15  housekeeping tasks which are incidental to the care and 
  6.16  supervision of the recipient.  This service must be approved by 
  6.17  the case manager as part of the care plan.  Companion services 
  6.18  must be provided by individuals or organizations who are under 
  6.19  contract with the local agency to provide the service.  Any 
  6.20  person related to the waiver recipient by blood, marriage or 
  6.21  adoption cannot be reimbursed under this service.  Persons 
  6.22  providing companion services will be monitored by the case 
  6.23  manager. 
  6.24     (l) For purposes of this section, training for direct 
  6.25  informal caregivers is defined as a classroom or home course of 
  6.26  instruction which may include:  transfer and lifting skills, 
  6.27  nutrition, personal and physical cares, home safety in a home 
  6.28  environment, stress reduction and management, behavioral 
  6.29  management, long-term care decision making, care coordination 
  6.30  and family dynamics.  The training is provided to an informal 
  6.31  unpaid caregiver of a 180-day eligible client which enables the 
  6.32  caregiver to deliver care in a home setting with high levels of 
  6.33  quality.  The training must be approved by the case manager as 
  6.34  part of the individual care plan.  Individuals, agencies, and 
  6.35  educational facilities which provide caregiver training and 
  6.36  education will be monitored by the case manager. 
  7.1      (m) A county agency may make payment from their alternative 
  7.2   care program allocation for other services provided to an 
  7.3   alternative care program recipient if those services prevent, 
  7.4   shorten, or delay institutionalization.  These services may 
  7.5   include direct cash payments to the recipient for the purpose of 
  7.6   purchasing the recipient's services.  The following provisions 
  7.7   apply to payments under this paragraph: 
  7.8      (1) a cash payment to a client under this provision cannot 
  7.9   exceed 80 percent of the monthly payment limit for that client 
  7.10  as specified in subdivision 4, paragraph (a), clause (7); 
  7.11     (2) a county may not approve any cash payment for a client 
  7.12  who has been assessed as having a dependency in orientation, 
  7.13  unless the client has an authorized representative under section 
  7.14  256.476, subdivision 2, paragraph (g), or for a client who is 
  7.15  concurrently receiving adult foster care, residential care, or 
  7.16  assisted living services; 
  7.17     (3) any service approved under this section must be a 
  7.18  service which meets the purpose and goals of the program as 
  7.19  listed in subdivision 1; 
  7.20     (4) cash payments must also meet the criteria of and are 
  7.21  governed by the procedures and liability protection established 
  7.22  in section 256.476, subdivision 4, ~~paragraph~~ 
  7.23  paragraphs (b) through (h), and recipients of cash grants must 
  7.24  meet the requirements in section 256.476, subdivision 10; and 
  7.25     (5) the county shall report client outcomes, services, and 
  7.26  costs under this paragraph in a manner prescribed by the 
  7.27  commissioner. 
  7.28  Upon implementation of direct cash payments to clients under 
  7.29  this section, any person determined eligible for the alternative 
  7.30  care program who chooses a cash payment approved by the county 
  7.31  agency shall receive the cash payment under this section and not 
  7.32  under section 256.476 unless the person was receiving a consumer 
  7.33  support grant under section 256.476 before implementation of 
  7.34  direct cash payments under this section. 
  7.35     Sec. 2.  Minnesota Statutes 1998, section 256B.411, 
  7.36  subdivision 2, is amended to read: 
  8.1      Subd. 2.  [REQUIREMENTS.] No medical assistance payments 
  8.2   shall be made to any nursing facility unless the nursing 
  8.3   facility is certified to participate in the medical assistance 
  8.4   program under title XIX of the federal Social Security Act and 
  8.5   has in effect a provider agreement with the commissioner meeting 
  8.6   the requirements of state and federal statutes and rules.  No 
  8.7   medical assistance payments shall be made to any nursing 
  8.8   facility unless the nursing facility complies with all 
  8.9   requirements of Minnesota Statutes including, but not limited 
  8.10  to, this chapter and rules adopted under it that govern 
  8.11  participation in the program.  This section applies whether the 
  8.12  nursing facility participates fully in the medical assistance 
  8.13  program or is withdrawing from the medical assistance program.  
  8.14  No future payments may be made to any nursing facility which has 
  8.15  withdrawn or is withdrawing from the medical assistance program 
  8.16  except as provided in section 256B.48, subdivision 1a~~; provided,~~ 
  8.17  ~~however, that~~, or federal law.  Payments may also be made under 
  8.18  a court order entered on or before June 7, 1985, unless the 
  8.19  court order is reversed on appeal. 
  8.20     Sec. 3.  Minnesota Statutes 1998, section 256B.431, 
  8.21  subdivision 1, is amended to read: 
  8.22     Subdivision 1.  [IN GENERAL.] The commissioner shall 
  8.23  determine prospective payment rates for resident care costs.  ~~In~~ 
  8.24  ~~determining the rates, the commissioner shall group nursing~~ 
  8.25  ~~facilities according to different levels of care and geographic~~ 
  8.26  ~~location until July 1, 1985.~~  For rates established on or after 
  8.27  July 1, 1985, the commissioner shall develop procedures for 
  8.28  determining operating cost payment rates that take into account 
  8.29  the mix of resident needs, geographic location, and other 
  8.30  factors as determined by the commissioner.  The commissioner 
  8.31  shall consider whether the fact that a facility is attached to a 
  8.32  hospital or has an average length of stay of 180 days or less 
  8.33  should be taken into account in determining rates.  The 
  8.34  commissioner shall consider the use of the standard metropolitan 
  8.35  statistical areas when developing groups by geographic 
  8.36  location.  ~~Until the commissioner establishes procedures for~~ 
  9.1   ~~determining operating cost payment rates, the commissioner shall~~ 
  9.2   ~~group all convalescent and nursing care units attached to~~ 
  9.3   ~~hospitals into one group for purposes of determining~~ 
  9.4   ~~reimbursement for operating costs.  On or before June 15, 1983,~~ 
  9.5   ~~the commissioner shall mail notices to each nursing facility of~~ 
  9.6   ~~the rates to be effective from July 1 of that year to June 30 of~~ 
  9.7   ~~the following year.  In subsequent years,~~ The commissioner shall 
  9.8   provide notice to each nursing facility on or before May 1 of 
  9.9   the rates effective for the following rate year~~.  If a statute~~ 
  9.10  ~~enacted after May 1 affects the rates, the commissioner shall~~ 
  9.11  ~~provide a revised notice to each nursing facility as soon as~~ 
  9.12  ~~possible~~ except that if legislation is pending on May 1 that may 
  9.13  affect rates for nursing facilities, the commissioner shall set 
  9.14  the rates after the legislation is enacted and provide notice to 
  9.15  each facility as soon as possible.  
  9.16     ~~The commissioner shall establish, by rule, limitations on~~ 
  9.17  ~~compensation recognized in the historical base for top~~ 
  9.18  ~~management personnel.  For rate years beginning July 1, 1985,~~ 
  9.19  ~~the commissioner shall not provide, by rule, limitations on top~~ 
  9.20  ~~management personnel.~~  Compensation for top management personnel 
  9.21  shall continue to be categorized as a general and administrative 
  9.22  cost and is subject to any limits imposed on that cost 
  9.23  category.  ~~The commissioner shall also establish, by rule,~~ 
  9.24  ~~limitations on allowable nursing hours for each level of care~~ 
  9.25  ~~for the rate years beginning July 1, 1983 and July 1, 1984.  For~~ 
  9.26  ~~the rate year beginning July 1, 1984, nursing facilities in~~ 
  9.27  ~~which the nursing hours exceeded 2.9 hours per day for skilled~~ 
  9.28  ~~nursing care or 2.3 hours per day for intermediate care for the~~ 
  9.29  ~~reporting year ending on September 30, 1983, shall be limited to~~ 
  9.30  ~~a maximum of 3.2 hours per day for skilled nursing care and 2.6~~ 
  9.31  ~~hours per day for intermediate care.~~ 
  9.32     Sec. 4.  Minnesota Statutes 1998, section 256B.431, 
  9.33  subdivision 3a, is amended to read: 
  9.34     Subd. 3a.  [PROPERTY-RELATED COSTS AFTER JULY 1, 1985.] (a) 
  9.35  For rate years beginning on or after July 1, 1985, the 
  9.36  commissioner, by permanent rule, shall reimburse nursing 
 10.1   facility providers that are vendors in the medical assistance 
 10.2   program for the rental use of real estate and depreciable 
 10.3   equipment.  "Real estate" means land improvements, buildings, 
 10.4   and attached fixtures used directly for resident care.  
 10.5   "Depreciable equipment" means the standard movable resident care 
 10.6   equipment and support service equipment generally used in 
 10.7   long-term care facilities.  
 10.8      (b) In developing the method for determining payment rates 
 10.9   for the rental use of nursing facilities, the commissioner shall 
 10.10  consider factors designed to:  
 10.11     (1) simplify the administrative procedures for determining 
 10.12  payment rates for property-related costs; 
 10.13     (2) minimize discretionary or appealable decisions; 
 10.14     (3) eliminate any incentives to sell nursing facilities; 
 10.15     (4) recognize legitimate costs of preserving and replacing 
 10.16  property; 
 10.17     (5) recognize the existing costs of outstanding 
 10.18  indebtedness allowable under the statutes and rules in effect on 
 10.19  May 1, 1983; 
 10.20     (6) address the current value of, if used directly for 
 10.21  patient care, land improvements, buildings, attached fixtures, 
 10.22  and equipment; 
 10.23     (7) establish an investment per bed limitation; 
 10.24     (8) reward efficient management of capital assets; 
 10.25     (9) provide equitable treatment of facilities; 
 10.26     (10) consider a variable rate; and 
 10.27     (11) phase-in implementation of the rental reimbursement 
 10.28  method.  
 10.29     ~~(c) No later than January 1, 1984, the commissioner shall~~ 
 10.30  ~~report to the legislature on any further action necessary or~~ 
 10.31  ~~desirable in order to implement the purposes and provisions of~~ 
 10.32  ~~this subdivision.~~  
 10.33     ~~(d)~~ (c) For rate years beginning on or after July 1, 1987, 
 10.34  a nursing facility which has reduced licensed bed capacity after 
 10.35  January 1, 1986, shall be allowed to: 
 10.36     (1) aggregate the applicable investment per bed limits 
 11.1   based on the number of beds licensed prior to the reduction; and 
 11.2      (2) establish capacity days for each rate year following 
 11.3   the licensure reduction based on the number of beds licensed on 
 11.4   the previous April 1 if the commissioner is notified of the 
 11.5   change by April 4.  The notification must include a copy of the 
 11.6   delicensure request that has been submitted to the commissioner 
 11.7   of health. 
 11.8      ~~(e) Until the rental reimbursement method is fully phased~~ 
 11.9   ~~in, a nursing facility whose final property-related payment rate~~ 
 11.10  ~~is the rental rate shall continue to have its property-related~~ 
 11.11  ~~payment rates established based on the rental reimbursement~~ 
 11.12  ~~method.~~ 
 11.13     ~~(f)~~ (d) For rate years beginning on or after July 1, 1989, 
 11.14  the interest expense that results from a refinancing of a 
 11.15  nursing facility's demand call loan, when the loan that must be 
 11.16  refinanced was incurred before May 22, 1983, is an allowable 
 11.17  interest expense if: 
 11.18     (1) the demand call loan or any part of it was in the form 
 11.19  of a loan that was callable at the demand of the lender; 
 11.20     (2) the demand call loan or any part of it was called by 
 11.21  the lender through no fault of the nursing facility; 
 11.22     (3) the demand call loan or any part of it was made by a 
 11.23  government agency operating under a statutory or regulatory loan 
 11.24  program; 
 11.25     (4) the refinanced debt does not exceed the sum of the 
 11.26  allowable remaining balance of the demand call loan at the time 
 11.27  of payment on the demand call loan and refinancing costs; 
 11.28     (5) the term of the refinanced debt does not exceed the 
 11.29  remaining term of the demand call loan, had the debt not been 
 11.30  subject to an on-call payment demand; and 
 11.31     (6) the refinanced debt is not a debt between related 
 11.32  organizations as defined in Minnesota Rules, part 9549.0020, 
 11.33  subpart 38. 
 11.34     Sec. 5.  Minnesota Statutes 1998, section 256B.431, 
 11.35  subdivision 10, is amended to read: 
 11.36     Subd. 10.  [PROPERTY RATE ADJUSTMENTS AND CONSTRUCTION 
 12.1   PROJECTS.] A nursing facility's request for a property-related 
 12.2   payment rate adjustment and the related supporting documentation 
 12.3   of project construction cost information must be submitted to 
 12.4   the commissioner within 60 days after the construction project's 
 12.5   completion date to be considered eligible for a property-related 
 12.6   payment rate adjustment.  Construction projects with completion 
 12.7   dates within one year of the completion date associated with the 
 12.8   property rate adjustment request and phased projects with 
 12.9   project completion dates within three years of the last phase of 
 12.10  the phased project must be aggregated for purposes of the 
 12.11  minimum thresholds in subdivisions 16 and 17, and the maximum 
 12.12  threshold in section 144A.071, subdivision 2.  "Construction 
 12.13  project~~,~~" and "project construction costs~~,~~" ~~and "phased project"~~ 
 12.14  have the meanings given them in Minnesota ~~Rules, part 4655.1110~~ 
 12.15  ~~(Emergency)~~ Statutes, section 144A.071, subdivision 1a. 
 12.16     Sec. 6.  Minnesota Statutes 1998, section 256B.431, 
 12.17  subdivision 16, is amended to read: 
 12.18     Subd. 16.  [MAJOR ADDITIONS AND REPLACEMENTS; EQUITY 
 12.19  INCENTIVE.] For rate years beginning after June 30, 1993, if a 
 12.20  nursing facility acquires capital assets in connection with a 
 12.21  project approved under the moratorium exception process in 
 12.22  section 144A.073 or in connection with an addition to or 
 12.23  replacement of buildings, attached fixtures, or land 
 12.24  improvements for which the total historical cost of those 
 12.25  capital asset additions exceeds the lesser of $150,000 or ten 
 12.26  percent of the most recent appraised value, the nursing facility 
 12.27  shall be eligible for an equity incentive payment rate as in 
 12.28  paragraphs (a) to (d).  This computation is separate from the 
 12.29  determination of the nursing facility's rental rate.  An equity 
 12.30  incentive payment rate as computed under this subdivision is 
 12.31  limited to one in a 12-month period. 
 12.32     (a) An eligible nursing facility shall receive an equity 
 12.33  incentive payment rate equal to the allowable historical cost of 
 12.34  the capital asset acquired, minus the allowable debt directly 
 12.35  identified to that capital asset, multiplied by the equity 
 12.36  incentive factor as described in paragraphs (b) and (c), and 
 13.1   divided by the nursing facility's occupancy factor under 
 13.2   subdivision 3f, paragraph (c).  This amount shall be added to 
 13.3   the nursing facility's total payment rate and shall be effective 
 13.4   the same day as the incremental increase in paragraph (d) or 
 13.5   subdivision 17.  The allowable historical cost of the capital 
 13.6   assets and the allowable debt shall be determined as provided in 
 13.7   Minnesota Rules, parts 9549.0010 to 9549.0080, and this section. 
 13.8      (b) The equity incentive factor shall be determined under 
 13.9   clauses (1) to (4):  
 13.10     (1) divide the initial allowable debt in paragraph (a) by 
 13.11  the initial historical cost of the capital asset additions 
 13.12  referred to in paragraph (a), then cube the quotient, 
 13.13     (2) subtract the amount calculated in clause (1) from the 
 13.14  number one, 
 13.15     (3) determine the difference between the rental factor and 
 13.16  the lesser of two percentage points above the posted yield for 
 13.17  standard conventional fixed rate mortgages of the Federal Home 
 13.18  Loan Mortgage Corporation as published in the Wall Street 
 13.19  Journal and in effect on the first day of the month the debt or 
 13.20  cost is incurred, or 16 percent, 
 13.21     (4) multiply the amount calculated in clause (2) by the 
 13.22  amount calculated in clause (3). 
 13.23     (c) The equity incentive payment rate shall be limited to 
 13.24  the term of the allowable debt in paragraph (a), not greater 
 13.25  than 20 years nor less than ten years.  If no debt is incurred 
 13.26  in acquiring the capital asset, the equity incentive payment 
 13.27  rate shall be paid for ten years.  The sale of a nursing 
 13.28  facility under subdivision 14 shall terminate application of the 
 13.29  equity incentive payment rate effective on the date provided in 
 13.30  subdivision ~~4~~ 14, paragraph (f), for the sale. 
 13.31     (d) A nursing facility with an addition to or a renovation 
 13.32  of its buildings, attached fixtures, or land improvements 
 13.33  meeting the criteria in this subdivision and not receiving the 
 13.34  property-related payment rate adjustment in subdivision 17, 
 13.35  shall receive the incremental increase in the nursing facility's 
 13.36  rental rate as determined under Minnesota Rules, parts 9549.0010 
 14.1   to 9549.0080, and this section.  The incremental increase shall 
 14.2   be added to the nursing facility's property-related payment rate.
 14.3   The effective date of this incremental increase shall be the 
 14.4   first day of the month following the month in which the addition 
 14.5   or replacement is completed. 
 14.6      Sec. 7.  Minnesota Statutes 1999 Supplement, section 
 14.7   256B.431, subdivision 17, is amended to read: 
 14.8      Subd. 17.  [SPECIAL PROVISIONS FOR MORATORIUM EXCEPTIONS.] 
 14.9   (a) Notwithstanding Minnesota Rules, part 9549.0060, subpart 3, 
 14.10  for rate periods beginning on October 1, 1992, and for rate 
 14.11  years beginning after June 30, 1993, a nursing facility that (1) 
 14.12  has completed a construction project approved under section 
 14.13  144A.071, subdivision 4a, clause (m); (2) has completed a 
 14.14  construction project approved under section 144A.071, 
 14.15  subdivision 4a, and effective after June 30, 1995; or (3) has 
 14.16  completed a renovation, replacement, or upgrading project 
 14.17  approved under the moratorium exception process in section 
 14.18  144A.073 shall be reimbursed for costs directly identified to 
 14.19  that project as provided in subdivision 16 and this subdivision. 
 14.20     (b) Notwithstanding Minnesota Rules, part 9549.0060, 
 14.21  subparts 5, item A, subitems (1) and (3), and 7, item D, 
 14.22  allowable interest expense on debt shall include: 
 14.23     (1) interest expense on debt related to the cost of 
 14.24  purchasing or replacing depreciable equipment, excluding 
 14.25  vehicles, not to exceed six percent of the total historical cost 
 14.26  of the project; and 
 14.27     (2) interest expense on debt related to financing or 
 14.28  refinancing costs, including costs related to points, loan 
 14.29  origination fees, financing charges, legal fees, and title 
 14.30  searches; and issuance costs including bond discounts, bond 
 14.31  counsel, underwriter's counsel, corporate counsel, printing, and 
 14.32  financial forecasts.  Allowable debt related to items in this 
 14.33  clause shall not exceed seven percent of the total historical 
 14.34  cost of the project.  To the extent these costs are financed, 
 14.35  the straight-line amortization of the costs in this clause is 
 14.36  not an allowable cost; and 
 15.1      (3) interest on debt incurred for the establishment of a 
 15.2   debt reserve fund, net of the interest earned on the debt 
 15.3   reserve fund. 
 15.4      (c) Debt incurred for costs under paragraph (b) is not 
 15.5   subject to Minnesota Rules, part 9549.0060, subpart 5, item A, 
 15.6   subitem (5) or (6). 
 15.7      (d) The incremental increase in a nursing facility's rental 
 15.8   rate, determined under Minnesota Rules, parts 9549.0010 to 
 15.9   9549.0080, and this section, resulting from the acquisition of 
 15.10  allowable capital assets, and allowable debt and interest 
 15.11  expense under this subdivision shall be added to its 
 15.12  property-related payment rate and shall be effective on the 
 15.13  first day of the month following the month in which the 
 15.14  moratorium project was completed. 
 15.15     (e) Notwithstanding subdivision 3f, paragraph (a), for rate 
 15.16  periods beginning on October 1, 1992, and for rate years 
 15.17  beginning after June 30, 1993, the replacement-costs-new per bed 
 15.18  limit to be used in Minnesota Rules, part 9549.0060, subpart 4, 
 15.19  item B, for a nursing facility that has completed a renovation, 
 15.20  replacement, or upgrading project that has been approved under 
 15.21  the moratorium exception process in section 144A.073, or that 
 15.22  has completed an addition to or replacement of buildings, 
 15.23  attached fixtures, or land improvements for which the total 
 15.24  historical cost exceeds the lesser of $150,000 or ten percent of 
 15.25  the most recent appraised value, must be $47,500 per licensed 
 15.26  bed in multiple-bed rooms and $71,250 per licensed bed in a 
 15.27  single-bed room.  These amounts must be adjusted annually as 
 15.28  specified in subdivision 3f, paragraph (a), beginning January 1, 
 15.29  1993. 
 15.30     ~~(f) A nursing facility that completes a project identified~~ 
 15.31  ~~in this subdivision and, as of April 17, 1992, has not been~~ 
 15.32  ~~mailed a rate notice with a special appraisal for a completed~~ 
 15.33  ~~project, or completes a project after April 17, 1992, but before~~ 
 15.34  ~~September 1, 1992, may elect either to request a special~~ 
 15.35  ~~reappraisal with the corresponding adjustment to the~~ 
 15.36  ~~property-related payment rate under the laws in effect on June~~ 
 16.1   ~~30, 1992, or to submit their capital asset and debt information~~ 
 16.2   ~~after that date and obtain the property-related payment rate~~ 
 16.3   ~~adjustment under this section, but not both.~~ 
 16.4      ~~(g)~~ (f) For purposes of this paragraph, a total replacement 
 16.5   means the complete replacement of the nursing facility's 
 16.6   physical plant through the construction of a new physical plant 
 16.7   or the transfer of the nursing facility's license from one 
 16.8   physical plant location to another.  For total replacement 
 16.9   projects completed on or after July 1, 1992, the commissioner 
 16.10  shall compute the incremental change in the nursing facility's 
 16.11  rental per diem, for rate years beginning on or after July 1, 
 16.12  1995, by replacing its appraised value, including the historical 
 16.13  capital asset costs, and the capital debt and interest costs 
 16.14  with the new nursing facility's allowable capital asset costs 
 16.15  and the related allowable capital debt and interest costs.  If 
 16.16  the new nursing facility has decreased its licensed capacity, 
 16.17  the aggregate investment per bed limit in subdivision 3a, 
 16.18  paragraph ~~(d)~~ (c), shall apply.  If the new nursing facility has 
 16.19  retained a portion of the original physical plant for nursing 
 16.20  facility usage, then a portion of the appraised value prior to 
 16.21  the replacement must be retained and included in the calculation 
 16.22  of the incremental change in the nursing facility's rental per 
 16.23  diem.  For purposes of this part, the original nursing facility 
 16.24  means the nursing facility prior to the total replacement 
 16.25  project.  The portion of the appraised value to be retained 
 16.26  shall be calculated according to clauses (1) to (3): 
 16.27     (1) The numerator of the allocation ratio shall be the 
 16.28  square footage of the area in the original physical plant which 
 16.29  is being retained for nursing facility usage. 
 16.30     (2) The denominator of the allocation ratio shall be the 
 16.31  total square footage of the original nursing facility physical 
 16.32  plant. 
 16.33     (3) Each component of the nursing facility's allowable 
 16.34  appraised value prior to the total replacement project shall be 
 16.35  multiplied by the allocation ratio developed by dividing clause 
 16.36  (1) by clause (2). 
 17.1      In the case of either type of total replacement as 
 17.2   authorized under section 144A.071 or 144A.073, the provisions of 
 17.3   this subdivision shall also apply.  For purposes of the 
 17.4   moratorium exception authorized under section 144A.071, 
 17.5   subdivision 4a, paragraph (s), if the total replacement involves 
 17.6   the renovation and use of an existing health care facility 
 17.7   physical plant, the new allowable capital asset costs and 
 17.8   related debt and interest costs shall include first the 
 17.9   allowable capital asset costs and related debt and interest 
 17.10  costs of the renovation, to which shall be added the allowable 
 17.11  capital asset costs of the existing physical plant prior to the 
 17.12  renovation, and if reported by the facility, the related 
 17.13  allowable capital debt and interest costs. 
 17.14     ~~(h)~~ (g) Notwithstanding Minnesota Rules, part 9549.0060, 
 17.15  subpart 11, item C, subitem (2), for a total replacement, as 
 17.16  defined in paragraph ~~(g)~~ (f), authorized under section 144A.071 
 17.17  or 144A.073 after July 1, 1999, the replacement-costs-new per 
 17.18  bed limit shall be $74,280 per licensed bed in multiple-bed 
 17.19  rooms, $92,850 per licensed bed in semiprivate rooms with a 
 17.20  fixed partition separating the resident beds, and $111,420 per 
 17.21  licensed bed in single rooms.  Minnesota Rules, part 9549.0060, 
 17.22  subpart 11, item C, subitem (2), does not apply.  These amounts 
 17.23  must be adjusted annually as specified in subdivision 3f, 
 17.24  paragraph (a), beginning January 1, 2000.  
 17.25     ~~(i)~~ (h) For a total replacement, as defined in paragraph 
 17.26  ~~(g)~~ (f), authorized under section 144A.073 for a 96-bed nursing 
 17.27  home in Carlton county, the replacement-costs-new per bed limit 
 17.28  shall be $74,280 per licensed bed in multiple-bed rooms, $92,850 
 17.29  per licensed bed in semiprivate rooms with a fixed partition 
 17.30  separating the resident's beds, and $111,420 per licensed bed in 
 17.31  a single room.  Minnesota Rules, part 9549.0060, subpart 11, 
 17.32  item C, subitem (2), does not apply.  The resulting maximum 
 17.33  allowable replacement-costs-new multiplied by 1.25 shall 
 17.34  constitute the project's dollar threshold for purposes of 
 17.35  application of the limit set forth in section 144A.071, 
 17.36  subdivision 2.  The commissioner of health may waive the 
 18.1   requirements of section 144A.073, subdivision 3b, paragraph (b), 
 18.2   clause (2), on the condition that the other requirements of that 
 18.3   paragraph are met. 
 18.4      Sec. 8.  Minnesota Statutes 1998, section 256B.431, 
 18.5   subdivision 18, is amended to read: 
 18.6      Subd. 18.  [~~APPRAISALS;~~ UPDATING APPRAISALS, ADDITIONS, AND 
 18.7   REPLACEMENTS.] (a) Notwithstanding Minnesota Rules, part 
 18.8   9549.0060, subparts 1 to 3, the appraised value, routine 
 18.9   updating of the appraised value, and special reappraisals are 
 18.10  subject to this subdivision. 
 18.11     ~~(1) For rate years beginning after June 30, 1993, the~~ 
 18.12  ~~commissioner shall permit a nursing facility to appeal its~~ 
 18.13  ~~appraisal.  Any reappraisals conducted in connection with that~~ 
 18.14  ~~appeal must utilize the comparative-unit method as described in~~ 
 18.15  ~~the Marshall Valuation Service published by Marshall-Swift in~~ 
 18.16  ~~establishing the nursing facility's depreciated replacement cost.~~
 18.17     ~~Nursing facilities electing to appeal their appraised value~~ 
 18.18  ~~shall file written notice of appeal with the commissioner of~~ 
 18.19  ~~human services before December 30, 1992.  The cost of the~~ 
 18.20  ~~reappraisal, if any, shall be considered an allowable cost under~~ 
 18.21  ~~Minnesota Rules, parts 9549.0040, subpart 9, and 9549.0061.~~ 
 18.22     ~~(2) The redetermination of a nursing facility's appraised~~ 
 18.23  ~~value under this paragraph shall have no impact on the rental~~ 
 18.24  ~~payment rate determined under subdivision 13 but shall only be~~ 
 18.25  ~~used for calculating the nursing facility's rental rate under~~ 
 18.26  ~~Minnesota Rules, parts 9549.0010 to 9549.0080, and this section~~ 
 18.27  ~~for rate years beginning after June 30, 1993.~~  
 18.28     ~~(3)~~ For all rate years after June 30, 1993, the 
 18.29  commissioner shall no longer conduct any appraisals under 
 18.30  Minnesota Rules, part 9549.0060, for the purpose of determining 
 18.31  property-related payment rates. 
 18.32     (b) Notwithstanding Minnesota Rules, part 9549.0060, 
 18.33  subpart 2, for rate years beginning after June 30, 1993, the 
 18.34  commissioner shall routinely update the appraised value of each 
 18.35  nursing facility by adding the cost of capital asset 
 18.36  acquisitions to its allowable appraised value.  
 19.1      The commissioner shall also annually index each nursing 
 19.2   facility's allowable appraised value by the inflation index 
 19.3   referenced in subdivision 3f, paragraph (a), for the purpose of 
 19.4   computing the nursing facility's annual rental rate.  In 
 19.5   annually adjusting the nursing facility's appraised value, the 
 19.6   commissioner must not include the historical cost of capital 
 19.7   assets acquired during the reporting year in the nursing 
 19.8   facility's appraised value. 
 19.9      In addition, the nursing facility's appraised value must be 
 19.10  reduced by the historical cost of capital asset disposals or 
 19.11  applicable credits such as public grants and insurance 
 19.12  proceeds.  Capital asset additions and disposals must be 
 19.13  reported on the nursing facility's annual cost report in the 
 19.14  reporting year of acquisition or disposal.  The incremental 
 19.15  increase in the nursing facility's rental rate resulting from 
 19.16  this annual adjustment as determined under Minnesota Rules, 
 19.17  parts 9549.0010 to 9549.0080, and this section shall be added to 
 19.18  the nursing facility's property-related payment rate for the 
 19.19  rate year following the reporting year.  
 19.20     Sec. 9.  Minnesota Statutes 1998, section 256B.431, 
 19.21  subdivision 21, is amended to read: 
 19.22     Subd. 21.  [INDEXING THRESHOLDS.] Beginning January 1, 
 19.23  1993, and each January 1 thereafter, the commissioner shall 
 19.24  annually update the dollar thresholds in subdivisions 15, 
 19.25  paragraph ~~(d)~~ (e), 16, and 17, and in section 144A.071, 
 19.26  subdivisions 2 and 4a, clauses (b) and (e), by the inflation 
 19.27  index referenced in subdivision 3f, paragraph (a). 
 19.28     Sec. 10.  Minnesota Statutes 1998, section 256B.431, 
 19.29  subdivision 22, is amended to read: 
 19.30     Subd. 22.  [CHANGES TO NURSING FACILITY REIMBURSEMENT.] The 
 19.31  nursing facility reimbursement changes in paragraphs (a) 
 19.32  to ~~(e)~~ (d) apply to Minnesota Rules, parts 9549.0010 to 
 19.33  9549.0080, and this section, and are effective for rate years 
 19.34  beginning on or after July 1, 1993, unless otherwise indicated. 
 19.35     (a) In addition to the approved pension or profit sharing 
 19.36  plans allowed by the reimbursement rule, the commissioner shall 
 20.1   allow those plans specified in Internal Revenue Code, sections 
 20.2   403(b) and 408(k). 
 20.3      (b) The commissioner shall allow as workers' compensation 
 20.4   insurance costs under section 256B.421, subdivision 14, the 
 20.5   costs of workers' compensation coverage obtained under the 
 20.6   following conditions: 
 20.7      (1) a plan approved by the commissioner of commerce as a 
 20.8   Minnesota group or individual self-insurance plan as provided in 
 20.9   section 79A.03; 
 20.10     (2) a plan in which: 
 20.11     (i) the nursing facility, directly or indirectly, purchases 
 20.12  workers' compensation coverage in compliance with section 
 20.13  176.181, subdivision 2, from an authorized insurance carrier; 
 20.14     (ii) a related organization to the nursing facility 
 20.15  reinsures the workers' compensation coverage purchased, directly 
 20.16  or indirectly, by the nursing facility; and 
 20.17     (iii) all of the conditions in clause (4) are met; 
 20.18     (3) a plan in which: 
 20.19     (i) the nursing facility, directly or indirectly, purchases 
 20.20  workers' compensation coverage in compliance with section 
 20.21  176.181, subdivision 2, from an authorized insurance carrier; 
 20.22     (ii) the insurance premium is calculated retrospectively, 
 20.23  including a maximum premium limit, and paid using the paid loss 
 20.24  retro method; and 
 20.25     (iii) all of the conditions in clause (4) are met; 
 20.26     (4) additional conditions are: 
 20.27     (i) the costs of the plan are allowable under the federal 
 20.28  Medicare program; 
 20.29     (ii) the reserves for the plan are maintained in an account 
 20.30  controlled and administered by a person which is not a related 
 20.31  organization to the nursing facility; 
 20.32     (iii) the reserves for the plan cannot be used, directly or 
 20.33  indirectly, as collateral for debts incurred or other 
 20.34  obligations of the nursing facility or related organizations to 
 20.35  the nursing facility; 
 20.36     (iv) if the plan provides workers' compensation coverage 
 21.1   for non-Minnesota nursing facilities, the plan's cost 
 21.2   methodology must be consistent among all nursing facilities 
 21.3   covered by the plan, and if reasonable, is allowed 
 21.4   notwithstanding any reimbursement laws regarding cost allocation 
 21.5   to the contrary; 
 21.6      (v) central, affiliated, corporate, or nursing facility 
 21.7   costs related to their administration of the plan are costs 
 21.8   which must remain in the nursing facility's administrative cost 
 21.9   category and must not be allocated to other cost categories; 
 21.10     (vi) required security deposits, whether in the form of 
 21.11  cash, investments, securities, assets, letters of credit, or in 
 21.12  any other form are not allowable costs for purposes of 
 21.13  establishing the facilities payment rate; and 
 21.14     (vii) for the rate year beginning on July 1, 1998, a group 
 21.15  of nursing facilities related by common ownership that 
 21.16  self-insures workers' compensation may allocate its directly 
 21.17  identified costs of self-insuring its Minnesota nursing facility 
 21.18  workers among those nursing facilities in the group that are 
 21.19  reimbursed under this section or section 256B.434.  The method 
 21.20  of cost allocation shall be based on the ratio of each nursing 
 21.21  facility's total allowable salaries and wages to that of the 
 21.22  nursing facility group's total allowable salaries and wages, 
 21.23  then similarly allocated within each nursing facility's 
 21.24  operating cost categories.  The costs associated with the 
 21.25  administration of the group's self-insurance plan must remain 
 21.26  classified in the nursing facility's administrative cost 
 21.27  category.  A written request of the nursing facility group's 
 21.28  election to use this alternate method of allocation of 
 21.29  self-insurance costs must be received by the commissioner no 
 21.30  later than May 1, 1998, to take effect July 1, 1998, or such 
 21.31  costs shall continue to be allocated under the existing cost 
 21.32  allocation methods.  Once a nursing facility group elects this 
 21.33  method of cost allocation for its workers' compensation 
 21.34  self-insurance costs, it shall remain in effect until such time 
 21.35  as the group no longer self-insures these costs; 
 21.36     (5) any costs allowed pursuant to clauses (1) to (3) are 
 22.1   subject to the following requirements: 
 22.2      (i) if the nursing facility is sold or otherwise ceases 
 22.3   operations, the plan's reserves must be subject to an 
 22.4   actuarially based settle-up after 36 months from the date of 
 22.5   sale or the date on which operations ceased.  The facility's 
 22.6   medical assistance portion of the total excess plan reserves 
 22.7   must be paid to the state within 30 days following the date on 
 22.8   which excess plan reserves are determined; 
 22.9      (ii) any distribution of excess plan reserves made to or 
 22.10  withdrawals made by the nursing facility or a related 
 22.11  organization are applicable credits and must be used to reduce 
 22.12  the nursing facility's workers' compensation insurance costs in 
 22.13  the reporting period in which a distribution or withdrawal is 
 22.14  received; 
 22.15     (iii) if reimbursement for the plan is sought under the 
 22.16  federal Medicare program, and is audited pursuant to the 
 22.17  Medicare program, the nursing facility must provide a copy of 
 22.18  Medicare's final audit report, including attachments and 
 22.19  exhibits, to the commissioner within 30 days of receipt by the 
 22.20  nursing facility or any related organization.  The commissioner 
 22.21  shall implement the audit findings associated with the plan upon 
 22.22  receipt of Medicare's final audit report.  The department's 
 22.23  authority to implement the audit findings is independent of its 
 22.24  authority to conduct a field audit. 
 22.25     (c) In the determination of incremental increases in the 
 22.26  nursing facility's rental rate as required in subdivisions 14 to 
 22.27  21, except for a refinancing permitted under subdivision 19, the 
 22.28  commissioner must adjust the nursing facility's property-related 
 22.29  payment rate for both incremental increases and decreases in 
 22.30  recomputations of its rental rate; 
 22.31     (d) A nursing facility's administrative cost limitation 
 22.32  must be modified as follows: 
 22.33     (1) if the nursing facility's licensed beds exceed 195 
 22.34  licensed beds, the general and administrative cost category 
 22.35  limitation shall be 13 percent; 
 22.36     (2) if the nursing facility's licensed beds are more than 
 23.1   150 licensed beds, but less than 196 licensed beds, the general 
 23.2   and administrative cost category limitation shall be 14 percent; 
 23.3   or 
 23.4      (3) if the nursing facility's licensed beds is less than 
 23.5   151 licensed beds, the general and administrative cost category 
 23.6   limitation shall remain at 15 percent. 
 23.7      (e) ~~The care related operating rate shall be increased by~~ 
 23.8   ~~eight cents to reimburse facilities for unfunded federal~~ 
 23.9   ~~mandates, including costs related to hepatitis B vaccinations.~~ 
 23.10     ~~(f)~~ For the rate year beginning on July 1, 1998, a group of 
 23.11  nursing facilities related by common ownership that self-insures 
 23.12  group health, dental, or life insurance may allocate its 
 23.13  directly identified costs of self-insuring its Minnesota nursing 
 23.14  facility workers among those nursing facilities in the group 
 23.15  that are reimbursed under this section or section 256B.434.  The 
 23.16  method of cost allocation shall be based on the ratio of each 
 23.17  nursing facility's total allowable salaries and wages to that of 
 23.18  the nursing facility group's total allowable salaries and wages, 
 23.19  then similarly allocated within each nursing facility's 
 23.20  operating cost categories.  The costs associated with the 
 23.21  administration of the group's self-insurance plan must remain 
 23.22  classified in the nursing facility's administrative cost 
 23.23  category.  A written request of the nursing facility group's 
 23.24  election to use this alternate method of allocation of 
 23.25  self-insurance costs must be received by the commissioner no 
 23.26  later than May 1, 1998, to take effect July 1, 1998, or those 
 23.27  self-insurance costs shall continue to be allocated under the 
 23.28  existing cost allocation methods.  Once a nursing facility group 
 23.29  elects this method of cost allocation for its group health, 
 23.30  dental, or life insurance self-insurance costs, it shall remain 
 23.31  in effect until such time as the group no longer self-insures 
 23.32  these costs. 
 23.33     Sec. 11.  Minnesota Statutes 1998, section 256B.431, 
 23.34  subdivision 25, is amended to read: 
 23.35     Subd. 25.  [CHANGES TO NURSING FACILITY REIMBURSEMENT 
 23.36  BEGINNING JULY 1, 1995.] ~~The nursing facility reimbursement~~ 
 24.1   ~~changes in paragraphs (a) to (g) shall apply in the sequence~~ 
 24.2   ~~specified to Minnesota Rules, parts 9549.0010 to 9549.0080, and~~ 
 24.3   ~~this section, beginning July 1, 1995.~~ 
 24.4      ~~(a) The eight-cent adjustment to care-related rates in~~ 
 24.5   ~~subdivision 22, paragraph (e), shall no longer apply.~~ 
 24.6      ~~(b) For rate years beginning on or after July 1, 1995, the~~ 
 24.7   ~~commissioner shall limit a nursing facility's allowable~~ 
 24.8   ~~operating per diem for each case mix category for each rate year~~ 
 24.9   ~~as in clauses (1) to (3).~~ 
 24.10     ~~(1) For the rate year beginning July 1, 1995, the~~ 
 24.11  ~~commissioner shall group nursing facilities into two groups,~~ 
 24.12  ~~freestanding and nonfreestanding, within each geographic group,~~ 
 24.13  ~~using their operating cost per diem for the case mix A~~ 
 24.14  ~~classification.  A nonfreestanding nursing facility is a nursing~~ 
 24.15  ~~facility whose other operating cost per diem is subject to the~~ 
 24.16  ~~hospital attached, short length of stay, or the rule 80 limits.~~  
 24.17  ~~All other nursing facilities shall be considered freestanding~~ 
 24.18  ~~nursing facilities.  The commissioner shall then array all~~ 
 24.19  ~~nursing facilities in each grouping by their allowable case mix~~ 
 24.20  ~~A operating cost per diem.  In calculating a nursing facility's~~ 
 24.21  ~~operating cost per diem for this purpose, the commissioner shall~~ 
 24.22  ~~exclude the raw food cost per diem related to providing special~~ 
 24.23  ~~diets that are based on religious beliefs, as determined in~~ 
 24.24  ~~subdivision 2b, paragraph (h).  For those nursing facilities in~~ 
 24.25  ~~each grouping whose case mix A operating cost per diem:~~ 
 24.26     ~~(i) is at or below the median minus 1.0 standard deviation~~ 
 24.27  ~~of the array, the commissioner shall limit the nursing~~ 
 24.28  ~~facility's allowable operating cost per diem for each case mix~~ 
 24.29  ~~category to the lesser of the prior reporting year's allowable~~ 
 24.30  ~~operating cost per diems plus the inflation factor as~~ 
 24.31  ~~established in paragraph (f), clause (2), increased by six~~ 
 24.32  ~~percentage points, or the current reporting year's corresponding~~ 
 24.33  ~~allowable operating cost per diem;~~ 
 24.34     ~~(ii) is between minus .5 standard deviation and minus 1.0~~ 
 24.35  ~~standard deviation below the median of the array, the~~ 
 24.36  ~~commissioner shall limit the nursing facility's allowable~~ 
 25.1   ~~operating cost per diem for each case mix category to the lesser~~ 
 25.2   ~~of the prior reporting year's allowable operating cost per diems~~ 
 25.3   ~~plus the inflation factor as established in paragraph (f),~~ 
 25.4   ~~clause (2), increased by four percentage points, or the current~~ 
 25.5   ~~reporting year's corresponding allowable operating cost per~~ 
 25.6   ~~diem; or~~ 
 25.7      ~~(iii) is equal to or above minus .5 standard deviation~~ 
 25.8   ~~below the median of the array, the commissioner shall limit the~~ 
 25.9   ~~nursing facility's allowable operating cost per diem for each~~ 
 25.10  ~~case mix category to the lesser of the prior reporting year's~~ 
 25.11  ~~allowable operating cost per diems plus the inflation factor as~~ 
 25.12  ~~established in paragraph (f), clause (2), increased by three~~ 
 25.13  ~~percentage points, or the current reporting year's corresponding~~ 
 25.14  ~~allowable operating cost per diem.~~ 
 25.15     ~~(2) For the rate year beginning on July 1, 1996, the~~ 
 25.16  ~~commissioner shall limit the nursing facility's allowable~~ 
 25.17  ~~operating cost per diem for each case mix category to the lesser~~ 
 25.18  ~~of the prior reporting year's allowable operating cost per diems~~ 
 25.19  ~~plus the inflation factor as established in paragraph (f),~~ 
 25.20  ~~clause (2), increased by one percentage point or the current~~ 
 25.21  ~~reporting year's corresponding allowable operating cost per~~ 
 25.22  ~~diems; and~~ 
 25.23     ~~(3) For rate years beginning on or after July 1, 1997, the~~ 
 25.24  ~~commissioner shall limit the nursing facility's allowable~~ 
 25.25  ~~operating cost per diem for each case mix category to the lesser~~ 
 25.26  ~~of the reporting year prior to the current reporting year's~~ 
 25.27  ~~allowable operating cost per diems plus the inflation factor as~~ 
 25.28  ~~established in paragraph (f), clause (2), or the current~~ 
 25.29  ~~reporting year's corresponding allowable operating cost per~~ 
 25.30  ~~diems.~~ 
 25.31     ~~(c) For rate years beginning on July 1, 1995, the~~ 
 25.32  ~~commissioner shall limit the allowable operating cost per diems~~ 
 25.33  ~~for high cost nursing facilities.  After application of the~~ 
 25.34  ~~limits in paragraph (b) to each nursing facility's operating~~ 
 25.35  ~~cost per diems, the commissioner shall group nursing facilities~~ 
 25.36  ~~into two groups, freestanding or nonfreestanding, within each~~ 
 26.1   ~~geographic group.  A nonfreestanding nursing facility is a~~ 
 26.2   ~~nursing facility whose other operating cost per diems are~~ 
 26.3   ~~subject to hospital attached, short length of stay, or rule 80~~ 
 26.4   ~~limits.  All other nursing facilities shall be considered~~ 
 26.5   ~~freestanding nursing facilities.  The commissioner shall then~~ 
 26.6   ~~array all nursing facilities within each grouping by their~~ 
 26.7   ~~allowable case mix A operating cost per diems.  In calculating a~~ 
 26.8   ~~nursing facility's operating cost per diem for this purpose, the~~ 
 26.9   ~~commissioner shall exclude the raw food cost per diem related to~~ 
 26.10  ~~providing special diets that are based on religious beliefs, as~~ 
 26.11  ~~determined in subdivision 2b, paragraph (h).  For those nursing~~ 
 26.12  ~~facilities in each grouping whose case mix A operating cost per~~ 
 26.13  ~~diem exceeds 1.0 standard deviation above the median, the~~ 
 26.14  ~~commissioner shall reduce their allowable operating cost per~~ 
 26.15  ~~diems by two percent.  For those nursing facilities in each~~ 
 26.16  ~~grouping whose case mix A operating cost per diem exceeds 0.5~~ 
 26.17  ~~standard deviation above the median but is less than or equal to~~ 
 26.18  ~~1.0 standard deviation above the median, the commissioner shall~~ 
 26.19  ~~reduce their allowable operating cost per diems by one percent.~~ 
 26.20     ~~(d) For rate years beginning on or after July 1, 1996, the~~ 
 26.21  ~~commissioner shall limit the allowable operating cost per diems~~ 
 26.22  ~~for high cost nursing facilities.  After application of the~~ 
 26.23  ~~limits in paragraph (b) to each nursing facility's operating~~ 
 26.24  ~~cost per diems, the commissioner shall group nursing facilities~~ 
 26.25  ~~into two groups, freestanding or nonfreestanding, within each~~ 
 26.26  ~~geographic group.  A nonfreestanding nursing facility is a~~ 
 26.27  ~~nursing facility whose other operating cost per diems are~~ 
 26.28  ~~subject to hospital attached, short length of stay, or rule 80~~ 
 26.29  ~~limits.  All other nursing facilities shall be considered~~ 
 26.30  ~~freestanding nursing facilities.  The commissioner shall then~~ 
 26.31  ~~array all nursing facilities within each grouping by their~~ 
 26.32  ~~allowable case mix A operating cost per diems.  In calculating a~~ 
 26.33  ~~nursing facility's operating cost per diem for this purpose, the~~ 
 26.34  ~~commissioner shall exclude the raw food cost per diem related to~~ 
 26.35  ~~providing special diets that are based on religious beliefs, as~~ 
 26.36  ~~determined in subdivision 2b, paragraph (h).  In those nursing~~ 
 27.1   ~~facilities in each grouping whose case mix A operating cost per~~ 
 27.2   ~~diem exceeds 1.0 standard deviation above the median, the~~ 
 27.3   ~~commissioner shall reduce their allowable operating cost per~~ 
 27.4   ~~diems by three percent.  For those nursing facilities in each~~ 
 27.5   ~~grouping whose case mix A operating cost per diem exceeds 0.5~~ 
 27.6   ~~standard deviation above the median but is less than or equal to~~ 
 27.7   ~~1.0 standard deviation above the median, the commissioner shall~~ 
 27.8   ~~reduce their allowable operating cost per diems by two percent.~~ 
 27.9      ~~(e) For rate years beginning on or after July 1, 1995, the~~ 
 27.10  ~~commissioner shall determine a nursing facility's efficiency~~ 
 27.11  ~~incentive by first computing the allowable difference, which is~~ 
 27.12  ~~the lesser of $4.50 or the amount by which the facility's other~~ 
 27.13  ~~operating cost limit exceeds its nonadjusted other operating~~ 
 27.14  ~~cost per diem for that rate year.  The commissioner shall~~ 
 27.15  ~~compute the efficiency incentive by:~~ 
 27.16     ~~(1) subtracting the allowable difference from $4.50 and~~ 
 27.17  ~~dividing the result by $4.50;~~ 
 27.18     ~~(2) multiplying 0.20 by the ratio resulting from clause~~ 
 27.19  ~~(1), and then;~~ 
 27.20     ~~(3) adding 0.50 to the result from clause (2); and~~ 
 27.21     ~~(4) multiplying the result from clause (3) times the~~ 
 27.22  ~~allowable difference.~~ 
 27.23     ~~The nursing facility's efficiency incentive payment shall~~ 
 27.24  ~~be the lesser of $2.25 or the product obtained in clause (4).~~ 
 27.25     ~~(f) For rate years beginning on or after July 1, 1995, the~~ 
 27.26  ~~forecasted price index for a nursing facility's allowable~~ 
 27.27  ~~operating cost per diems shall be determined under clauses (1)~~ 
 27.28  ~~to (3) using the change in the Consumer Price Index-All Items~~ 
 27.29  ~~(United States city average) (CPI-U) or the change in the~~ 
 27.30  ~~Nursing Home Market Basket, both as forecasted by Data Resources~~ 
 27.31  ~~Inc., whichever is applicable.  The commissioner shall use the~~ 
 27.32  ~~indices as forecasted in the fourth quarter of the calendar year~~ 
 27.33  ~~preceding the rate year, subject to subdivision 2l, paragraph~~ 
 27.34  ~~(c).  If, as a result of federal legislative or administrative~~ 
 27.35  ~~action, the methodology used to calculate the Consumer Price~~ 
 27.36  ~~Index-All Items (United States city average) (CPI-U) changes,~~ 
 28.1   ~~the commissioner shall develop a conversion factor or other~~ 
 28.2   ~~methodology to convert the CPI-U index factor that results from~~ 
 28.3   ~~the new methodology to an index factor that approximates, as~~ 
 28.4   ~~closely as possible, the index factor that would have resulted~~ 
 28.5   ~~from application of the original CPI-U methodology prior to any~~ 
 28.6   ~~changes in methodology.  The commissioner shall use the~~ 
 28.7   ~~conversion factor or other methodology to calculate an adjusted~~ 
 28.8   ~~inflation index.  The adjusted inflation index must be used to~~ 
 28.9   ~~calculate payment rates under this section instead of the CPI-U~~ 
 28.10  ~~index specified in paragraph (d).  If the commissioner is~~ 
 28.11  ~~required to develop an adjusted inflation index, the~~ 
 28.12  ~~commissioner shall report to the legislature as part of the next~~ 
 28.13  ~~budget submission the fiscal impact of applying this index.~~ 
 28.14     ~~(1) The CPI-U forecasted index for allowable operating cost~~ 
 28.15  ~~per diems shall be based on the 21-month period from the~~ 
 28.16  ~~midpoint of the nursing facility's reporting year to the~~ 
 28.17  ~~midpoint of the rate year following the reporting year.~~ 
 28.18     ~~(2) The Nursing Home Market Basket forecasted index for~~ 
 28.19  ~~allowable operating costs and per diem limits shall be based on~~ 
 28.20  ~~the 12-month period between the midpoints of the two reporting~~ 
 28.21  ~~years preceding the rate year.~~ 
 28.22     ~~(3) For rate years beginning on or after July 1, 1996, the~~ 
 28.23  ~~forecasted index for operating cost limits referred to in~~ 
 28.24  ~~subdivision 21, paragraph (b), shall be based on the CPI-U for~~ 
 28.25  ~~the 12-month period between the midpoints of the two reporting~~ 
 28.26  ~~years preceding the rate year.~~ 
 28.27     ~~(g) After applying these provisions for the respective rate~~ 
 28.28  ~~years, the commissioner shall index these allowable operating~~ 
 28.29  ~~costs per diems by the inflation factor provided for in~~ 
 28.30  ~~paragraph (f), clause (1), and add the nursing facility's~~ 
 28.31  ~~efficiency incentive as computed in paragraph (e).~~ 
 28.32     ~~(h)(1)~~ A nursing facility licensed for 302 beds on 
 28.33  September 30, 1993, that was approved under the moratorium 
 28.34  exception process in section 144A.073 for a partial replacement, 
 28.35  and completed the replacement project in December 1994, is 
 28.36  exempt from Minnesota Statutes 1998, section 256B.431, 
 29.1   subdivision 25, paragraphs (b) to (d) for rate years beginning 
 29.2   on or after July 1, 1995. 
 29.3      ~~(2)~~ For the rate year beginning July 1, 1997, after 
 29.4   computing this nursing facility's payment rate according to 
 29.5   section 256B.434, the commissioner shall make a one-year rate 
 29.6   adjustment of $8.62 to the facility's contract payment rate for 
 29.7   the rate effect of operating cost changes associated with the 
 29.8   facility's 1994 downsizing project. 
 29.9      ~~(3)~~ For rate years beginning on or after July 1, 1997, the 
 29.10  commissioner shall add 35 cents to the facility's base property 
 29.11  related payment rate for the rate effect of reducing its 
 29.12  licensed capacity to 290 beds from 302 beds and shall add 83 
 29.13  cents to the facility's real estate tax and special assessment 
 29.14  payment rate for payments in lieu of real estate taxes.  The 
 29.15  adjustments in this clause shall remain in effect for the 
 29.16  duration of the facility's contract under section 256B.434. 
 29.17     ~~(i) Notwithstanding Laws 1996, chapter 451, article 3,~~ 
 29.18  ~~section 11, paragraph (h), for the rate years beginning on July~~ 
 29.19  ~~1, 1996, July 1, 1997, and July 1, 1998, a nursing facility~~ 
 29.20  ~~licensed for 40 beds effective May 1, 1992, with a subsequent~~ 
 29.21  ~~increase of 20 Medicare/Medicaid certified beds, effective~~ 
 29.22  ~~January 26, 1993, in accordance with an increase in licensure is~~ 
 29.23  ~~exempt from paragraphs (b) to (d).~~ 
 29.24     Sec. 12.  Minnesota Statutes 1999 Supplement, section 
 29.25  256B.431, subdivision 26, is amended to read: 
 29.26     Subd. 26.  [CHANGES TO NURSING FACILITY REIMBURSEMENT 
 29.27  BEGINNING JULY 1, 1997.] The nursing facility reimbursement 
 29.28  changes in paragraphs (a) to ~~(f)~~ (e) shall apply in the sequence 
 29.29  specified in Minnesota Rules, parts 9549.0010 to 9549.0080, and 
 29.30  this section, beginning July 1, 1997. 
 29.31     (a) For rate years beginning on or after July 1, 1997, the 
 29.32  commissioner shall limit a nursing facility's allowable 
 29.33  operating per diem for each case mix category for each rate year.
 29.34  The commissioner shall group nursing facilities into two groups, 
 29.35  freestanding and nonfreestanding, within each geographic group, 
 29.36  using their operating cost per diem for the case mix A 
 30.1   classification.  A nonfreestanding nursing facility is a nursing 
 30.2   facility whose other operating cost per diem is subject to the 
 30.3   hospital attached, short length of stay, or the rule 80 limits.  
 30.4   All other nursing facilities shall be considered freestanding 
 30.5   nursing facilities.  The commissioner shall then array all 
 30.6   nursing facilities in each grouping by their allowable case mix 
 30.7   A operating cost per diem.  In calculating a nursing facility's 
 30.8   operating cost per diem for this purpose, the commissioner shall 
 30.9   exclude the raw food cost per diem related to providing special 
 30.10  diets that are based on religious beliefs, as determined in 
 30.11  subdivision 2b, paragraph (h).  For those nursing facilities in 
 30.12  each grouping whose case mix A operating cost per diem: 
 30.13     (1) is at or below the median of the array, the 
 30.14  commissioner shall limit the nursing facility's allowable 
 30.15  operating cost per diem for each case mix category to the lesser 
 30.16  of the prior reporting year's allowable operating cost per diem 
 30.17  as specified in Laws 1996, chapter 451, article 3, section 11, 
 30.18  paragraph (h), plus the inflation factor as established in 
 30.19  paragraph (d), clause (2), increased by two percentage points, 
 30.20  or the current reporting year's corresponding allowable 
 30.21  operating cost per diem; or 
 30.22     (2) is above the median of the array, the commissioner 
 30.23  shall limit the nursing facility's allowable operating cost per 
 30.24  diem for each case mix category to the lesser of the prior 
 30.25  reporting year's allowable operating cost per diem as specified 
 30.26  in Laws 1996, chapter 451, article 3, section 11, paragraph (h), 
 30.27  plus the inflation factor as established in paragraph (d), 
 30.28  clause (2), increased by one percentage point, or the current 
 30.29  reporting year's corresponding allowable operating cost per diem.
 30.30     For purposes of paragraph (a), if a nursing facility 
 30.31  reports on its cost report a reduction in cost due to a refund 
 30.32  or credit for a rate year beginning on or after July 1, 1998, 
 30.33  the commissioner shall increase that facility's spend-up limit 
 30.34  for the rate year following the current rate year by the amount 
 30.35  of the cost reduction divided by its resident days for the 
 30.36  reporting year preceding the rate year in which the adjustment 
 31.1   is to be made. 
 31.2      (b) For rate years beginning on or after July 1, 1997, the 
 31.3   commissioner shall limit the allowable operating cost per diem 
 31.4   for high cost nursing facilities.  After application of the 
 31.5   limits in paragraph (a) to each nursing facility's operating 
 31.6   cost per diem, the commissioner shall group nursing facilities 
 31.7   into two groups, freestanding or nonfreestanding, within each 
 31.8   geographic group.  A nonfreestanding nursing facility is a 
 31.9   nursing facility whose other operating cost per diem are subject 
 31.10  to hospital attached, short length of stay, or rule 80 limits.  
 31.11  All other nursing facilities shall be considered freestanding 
 31.12  nursing facilities.  The commissioner shall then array all 
 31.13  nursing facilities within each grouping by their allowable case 
 31.14  mix A operating cost per diem.  In calculating a nursing 
 31.15  facility's operating cost per diem for this purpose, the 
 31.16  commissioner shall exclude the raw food cost per diem related to 
 31.17  providing special diets that are based on religious beliefs, as 
 31.18  determined in subdivision 2b, paragraph (h).  For those nursing 
 31.19  facilities in each grouping whose case mix A operating cost per 
 31.20  diem exceeds 1.0 standard deviation above the median, the 
 31.21  commissioner shall reduce their allowable operating cost per 
 31.22  diem by three percent.  For those nursing facilities in each 
 31.23  grouping whose case mix A operating cost per diem exceeds 0.5 
 31.24  standard deviation above the median but is less than or equal to 
 31.25  1.0 standard deviation above the median, the commissioner shall 
 31.26  reduce their allowable operating cost per diem by two percent.  
 31.27  However, in no case shall a nursing facility's operating cost 
 31.28  per diem be reduced below its grouping's limit established at 
 31.29  0.5 standard deviations above the median. 
 31.30     (c) For rate years beginning on or after July 1, 1997, the 
 31.31  commissioner shall determine a nursing facility's efficiency 
 31.32  incentive by first computing the allowable difference, which is 
 31.33  the lesser of $4.50 or the amount by which the facility's other 
 31.34  operating cost limit exceeds its nonadjusted other operating 
 31.35  cost per diem for that rate year.  The commissioner shall 
 31.36  compute the efficiency incentive by: 
 32.1      (1) subtracting the allowable difference from $4.50 and 
 32.2   dividing the result by $4.50; 
 32.3      (2) multiplying 0.20 by the ratio resulting from clause 
 32.4   (1), and then; 
 32.5      (3) adding 0.50 to the result from clause (2); and 
 32.6      (4) multiplying the result from clause (3) times the 
 32.7   allowable difference. 
 32.8      The nursing facility's efficiency incentive payment shall 
 32.9   be the lesser of $2.25 or the product obtained in clause (4). 
 32.10     (d) For rate years beginning on or after July 1, 1997, the 
 32.11  forecasted price index for a nursing facility's allowable 
 32.12  operating cost per diem shall be determined under clauses (1) 
 32.13  and (2) using the change in the Consumer Price Index-All Items 
 32.14  (United States city average) (CPI-U) as forecasted by Data 
 32.15  Resources, Inc.  The commissioner shall use the indices as 
 32.16  forecasted in the fourth quarter of the calendar year preceding 
 32.17  the rate year, subject to subdivision 2l, paragraph (c).  
 32.18     (1) The CPI-U forecasted index for allowable operating cost 
 32.19  per diem shall be based on the 21-month period from the midpoint 
 32.20  of the nursing facility's reporting year to the midpoint of the 
 32.21  rate year following the reporting year. 
 32.22     (2) For rate years beginning on or after July 1, 1997, the 
 32.23  forecasted index for operating cost limits referred to in 
 32.24  subdivision 21, paragraph (b), shall be based on the CPI-U for 
 32.25  the 12-month period between the midpoints of the two reporting 
 32.26  years preceding the rate year. 
 32.27     (e) After applying these provisions for the respective rate 
 32.28  years, the commissioner shall index these allowable operating 
 32.29  cost per diem by the inflation factor provided for in paragraph 
 32.30  (d), clause (1), and add the nursing facility's efficiency 
 32.31  incentive as computed in paragraph (c). 
 32.32     ~~(f) For rate years beginning on or after July 1, 1997, the~~ 
 32.33  ~~total operating cost payment rates for a nursing facility shall~~ 
 32.34  ~~be the greater of the total operating cost payment rates~~ 
 32.35  ~~determined under this section or the total operating cost~~ 
 32.36  ~~payment rates in effect on June 30, 1997, subject to rate~~ 
 33.1   ~~adjustments due to field audit or rate appeal resolution.  This~~ 
 33.2   ~~provision shall not apply to subsequent field audit adjustments~~ 
 33.3   ~~of the nursing facility's operating cost rates for rate years~~ 
 33.4   ~~beginning on or after July 1, 1997.~~ 
 33.5      ~~(g)~~ (f) For the rate years beginning on July 1, 1997, July 
 33.6   1, 1998, and July 1, 1999, a nursing facility licensed for 40 
 33.7   beds effective May 1, 1992, with a subsequent increase of 20 
 33.8   Medicare/Medicaid certified beds, effective January 26, 1993, in 
 33.9   accordance with an increase in licensure is exempt from 
 33.10  paragraphs (a) and (b). 
 33.11     ~~(h)~~ (g) For a nursing facility whose construction project 
 33.12  was authorized according to section 144A.073, subdivision 5, 
 33.13  paragraph (g), the operating cost payment rates for the new 
 33.14  location shall be determined based on Minnesota Rules, part 
 33.15  9549.0057.  The relocation allowed under section 144A.073, 
 33.16  subdivision 5, paragraph (g), and the rate determination allowed 
 33.17  under this paragraph must meet the cost neutrality requirements 
 33.18  of section 144A.073, subdivision 3c.  Paragraphs (a) and (b) 
 33.19  shall not apply until the second rate year after the settle-up 
 33.20  cost report is filed.  Notwithstanding subdivision 2b, paragraph 
 33.21  (g), real estate taxes and special assessments payable by the 
 33.22  new location, a 501(c)(3) nonprofit corporation, shall be 
 33.23  included in the payment rates determined under this subdivision 
 33.24  for all subsequent rate years. 
 33.25     ~~(i)~~ (h) For the rate year beginning July 1, 1997, the 
 33.26  commissioner shall compute the payment rate for a nursing 
 33.27  facility licensed for 94 beds on September 30, 1996, that 
 33.28  applied in October 1993 for approval of a total replacement 
 33.29  under the moratorium exception process in section 144A.073, and 
 33.30  completed the approved replacement in June 1995, with other 
 33.31  operating cost spend-up limit under paragraph (a), increased by 
 33.32  $3.98, and after computing the facility's payment rate according 
 33.33  to this section, the commissioner shall make a one-year positive 
 33.34  rate adjustment of $3.19 for operating costs related to the 
 33.35  newly constructed total replacement, without application of 
 33.36  paragraphs (a) and (b).  The facility's per diem, before the 
 34.1   $3.19 adjustment, shall be used as the prior reporting year's 
 34.2   allowable operating cost per diem for payment rate calculation 
 34.3   for the rate year beginning July 1, 1998.  A facility described 
 34.4   in this paragraph is exempt from paragraph (b) for the rate 
 34.5   years beginning July 1, 1997, and July 1, 1998. 
 34.6      ~~(j)~~ (i) For the purpose of applying the limit stated in 
 34.7   paragraph (a), a nursing facility in Kandiyohi county licensed 
 34.8   for 86 beds that was granted hospital-attached status on 
 34.9   December 1, 1994, shall have the prior year's allowable 
 34.10  care-related per diem increased by $3.207 and the prior year's 
 34.11  other operating cost per diem increased by $4.777 before adding 
 34.12  the inflation in paragraph (d), clause (2), for the rate year 
 34.13  beginning on July 1, 1997. 
 34.14     ~~(k)~~ (j) For the purpose of applying the limit stated in 
 34.15  paragraph (a), a 117 bed nursing facility located in Pine county 
 34.16  shall have the prior year's allowable other operating cost per 
 34.17  diem increased by $1.50 before adding the inflation in paragraph 
 34.18  (d), clause (2), for the rate year beginning on July 1, 1997. 
 34.19     ~~(l)~~ (k) For the purpose of applying the limit under 
 34.20  paragraph (a), a nursing facility in Hibbing licensed for 192 
 34.21  beds shall have the prior year's allowable other operating cost 
 34.22  per diem increased by $2.67 before adding the inflation in 
 34.23  paragraph (d), clause (2), for the rate year beginning July 1, 
 34.24  1997. 
 34.25     Sec. 13.  Minnesota Statutes 1999 Supplement, section 
 34.26  256B.434, subdivision 3, is amended to read: 
 34.27     Subd. 3.  [DURATION AND TERMINATION OF CONTRACTS.] (a) 
 34.28  Subject to available resources, the commissioner may begin to 
 34.29  execute contracts with nursing facilities November 1, 1995. 
 34.30     (b) All contracts entered into under this section are for a 
 34.31  term of one year.  Either party may terminate a contract at any 
 34.32  time without cause by providing 90 calendar days advance written 
 34.33  notice to the other party.  The decision to terminate a contract 
 34.34  is not appealable.  Notwithstanding section 16C.05, subdivision 
 34.35  2, paragraph (a), clause (5), the contract shall be renegotiated 
 34.36  for additional one-year terms, unless either party provides 
 35.1   written notice of termination.  The provisions of the contract 
 35.2   shall be renegotiated annually by the parties prior to the 
 35.3   expiration date of the contract.  The parties may voluntarily 
 35.4   renegotiate the terms of the contract at any time by mutual 
 35.5   agreement. 
 35.6      (c) If a nursing facility fails to comply with the terms of 
 35.7   a contract, the commissioner shall provide reasonable notice 
 35.8   regarding the breach of contract and a reasonable opportunity 
 35.9   for the facility to come into compliance.  If the facility fails 
 35.10  to come into compliance or to remain in compliance, the 
 35.11  commissioner may terminate the contract.  If a contract is 
 35.12  terminated, the contract payment remains in effect for the 
 35.13  remainder of the rate year in which the contract was terminated, 
 35.14  but in all other respects the provisions of this section do not 
 35.15  apply to that facility effective the date the contract is 
 35.16  terminated.  The contract shall contain a provision governing 
 35.17  the transition back to the cost-based reimbursement system 
 35.18  established under section 256B.431~~, subdivision 25,~~ and 
 35.19  Minnesota Rules, parts 9549.0010 to 9549.0080.  A contract 
 35.20  entered into under this section may be amended by mutual 
 35.21  agreement of the parties. 
 35.22     Sec. 14.  Minnesota Statutes 1999 Supplement, section 
 35.23  256B.434, subdivision 4, is amended to read: 
 35.24     Subd. 4.  [ALTERNATE RATES FOR NURSING FACILITIES.] (a) For 
 35.25  nursing facilities which have their payment rates determined 
 35.26  under this section rather than section 256B.431, ~~subdivision 25,~~ 
 35.27  the commissioner shall establish a rate under this subdivision.  
 35.28  The nursing facility must enter into a written contract with the 
 35.29  commissioner. 
 35.30     (b) A nursing facility's case mix payment rate for the 
 35.31  first rate year of a facility's contract under this section is 
 35.32  the payment rate the facility would have received under section 
 35.33  256B.431~~, subdivision 25~~. 
 35.34     (c) A nursing facility's case mix payment rates for the 
 35.35  second and subsequent years of a facility's contract under this 
 35.36  section are the previous rate year's contract payment rates plus 
 36.1   an inflation adjustment.  The index for the inflation adjustment 
 36.2   must be based on the change in the Consumer Price Index-All 
 36.3   Items (United States City average) (CPI-U) forecasted by Data 
 36.4   Resources, Inc., as forecasted in the fourth quarter of the 
 36.5   calendar year preceding the rate year.  The inflation adjustment 
 36.6   must be based on the 12-month period from the midpoint of the 
 36.7   previous rate year to the midpoint of the rate year for which 
 36.8   the rate is being determined.  For the rate years beginning on 
 36.9   July 1, 1999, and July 1, 2000, this paragraph shall apply only 
 36.10  to the property-related payment rate.  In determining the amount 
 36.11  of the property-related payment rate adjustment under this 
 36.12  paragraph, the commissioner shall determine the proportion of 
 36.13  the facility's rates that are property-related based on the 
 36.14  facility's most recent cost report. 
 36.15     (d) The commissioner shall develop additional 
 36.16  incentive-based payments of up to five percent above the 
 36.17  standard contract rate for achieving outcomes specified in each 
 36.18  contract.  The specified facility-specific outcomes must be 
 36.19  measurable and approved by the commissioner.  The commissioner 
 36.20  may establish, for each contract, various levels of achievement 
 36.21  within an outcome.  After the outcomes have been specified the 
 36.22  commissioner shall assign various levels of payment associated 
 36.23  with achieving the outcome.  Any incentive-based payment cancels 
 36.24  if there is a termination of the contract.  In establishing the 
 36.25  specified outcomes and related criteria the commissioner shall 
 36.26  consider the following state policy objectives: 
 36.27     (1) improved cost effectiveness and quality of life as 
 36.28  measured by improved clinical outcomes; 
 36.29     (2) successful diversion or discharge to community 
 36.30  alternatives; 
 36.31     (3) decreased acute care costs; 
 36.32     (4) improved consumer satisfaction; 
 36.33     (5) the achievement of quality; or 
 36.34     (6) any additional outcomes proposed by a nursing facility 
 36.35  that the commissioner finds desirable. 
 36.36     Sec. 15.  [REPEALER.] 
 37.1      Minnesota Statutes 1998, sections 256B.03, subdivision 2; 
 37.2   256B.431, subdivisions 2, 2a, 2f, 2h, 2m, 2p, 2q, 3, 3b, 3d, 3h, 
 37.3   3j, 4, 5, 7, 8, 9, 9a, 12, and 24; 256B.48, subdivision 9; 
 37.4   256B.50, subdivision 3; and 256B.74, subdivision 3, are repealed 
 37.5   effective July 1, 2000. 
 37.6      Sec. 16.  [REVISOR INSTRUCTIONS.] 
 37.7      In the next and subsequent editions of Minnesota Statutes 
 37.8   and Minnesota Rules, the revisor of statutes shall make any 
 37.9   necessary statutory cross-reference changes required as a result 
 37.10  of the provisions in this bill. 
 37.11     Sec. 17.  [EFFECTIVE DATE.] 
 37.12     Sections 1 to 15 are effective July 1, 2000.