1.1                          A bill for an act 
  1.2             relating to human services; changing provisions for 
  1.3             nursing facility reimbursement; establishing a nursing 
  1.4             facility reimbursement system effective in 2005; 
  1.5             amending Minnesota Statutes 2002, sections 256B.431, 
  1.6             subdivisions 28, 29, 30, 35; 256B.432, subdivisions 1, 
  1.7             2, 5, by adding subdivisions; 256B.434, subdivisions 
  1.8             4a, 4b, 4c, 4d, by adding a subdivision; Minnesota 
  1.9             Statutes 2003 Supplement, section 256B.47, subdivision 
  1.10            2; proposing coding for new law in Minnesota Statutes, 
  1.11            chapter 256B. 
  1.12  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.13     Section 1.  Minnesota Statutes 2002, section 256B.431, 
  1.14  subdivision 28, is amended to read: 
  1.15     Subd. 28.  [NURSING FACILITY RATE INCREASES BEGINNING JULY 
  1.16  1, 1999, AND JULY 1, 2000.] (a) For the rate years beginning 
  1.17  July 1, 1999, and July 1, 2000, the commissioner shall make 
  1.18  available to each nursing facility reimbursed under this section 
  1.19  or section 256B.434 an adjustment to the total operating payment 
  1.20  rate.  For nursing facilities reimbursed under this section or 
  1.21  section 256B.434, the July 1, 2000, operating payment rate 
  1.22  increases provided in this subdivision shall be applied to each 
  1.23  facility's June 30, 2000, operating payment rate.  For each 
  1.24  facility, total operating costs shall be separated into costs 
  1.25  that are compensation related and all other costs.  
  1.26  Compensation-related costs include salaries, payroll taxes, and 
  1.27  fringe benefits for all employees except management fees, the 
  1.28  administrator, and central office staff. 
  2.1      (b) For the rate year beginning July 1, 1999, the 
  2.3   commissioner shall make available a rate increase for 
  2.4   compensation-related costs of 4.843 percent and a rate increase 
  2.5   for all other operating costs of 3.446 percent. 
  2.6      (c) For the rate year beginning July 1, 2000, the 
  2.7   commissioner shall make available: 
  2.8      (1) a rate increase for compensation-related costs of 3.632 
  2.9   percent; 
  2.10     (2) an additional rate increase for each case mix payment 
  2.11  rate which must be used to increase the per-hour pay rate of all 
  2.12  employees except management fees, the administrator, and central 
  2.13  office staff by an equal dollar amount and to pay associated 
  2.14  costs for FICA, the Medicare tax, workers' compensation 
  2.15  premiums, and federal and state unemployment insurance, to be 
  2.16  calculated according to clauses (i) to (iii): 
  2.17     (i) the commissioner shall calculate the arithmetic mean of 
  2.18  the 11 June 30, 2000, operating rates for each facility; 
  2.19     (ii) the commissioner shall construct an array of nursing 
  2.20  facilities from highest to lowest, according to the arithmetic 
  2.21  mean calculated in clause (i).  A numerical rank shall be 
  2.22  assigned to each facility in the array.  The facility with the 
  2.23  highest mean shall be assigned a numerical rank of one.  The 
  2.24  facility with the lowest mean shall be assigned a numerical rank 
  2.25  equal to the total number of nursing facilities in the array.  
  2.26  All other facilities shall be assigned a numerical rank in 
  2.27  accordance with their position in the array; 
  2.28     (iii) the amount of the additional rate increase shall be 
  2.29  $1 plus an amount equal to $3.13 multiplied by the ratio of the 
  2.30  facility's numeric rank divided by the number of facilities in 
  2.31  the array; and 
  2.32     (3) a rate increase for all other operating costs of 2.585 
  2.33  percent.  
  2.34     Money received by a facility as a result of the additional 
  2.35  rate increase provided under clause (2) shall be used only for 
  2.36  wage increases implemented on or after July 1, 2000, and shall 
  2.37  not be used for wage increases implemented prior to that date. 
  3.1      (d) The payment rate adjustment for each nursing facility 
  3.2   must be determined under clause (1) or (2): 
  3.3      (1) for each nursing facility that reports salaries for 
  3.4   registered nurses, licensed practical nurses, aides, orderlies, 
  3.5   and attendants separately, the commissioner shall determine the 
  3.6   payment rate adjustment using the categories specified in 
  3.7   paragraph (a) multiplied by the rate increases specified in 
  3.8   paragraph (b) or (c), and then dividing the resulting amount by 
  3.9   the nursing facility's actual resident days.  In determining the 
  3.10  amount of a payment rate adjustment for a nursing facility 
  3.11  reimbursed under section 256B.434, the commissioner shall 
  3.12  determine the proportions of the facility's rates that are 
  3.13  compensation-related costs and all other operating costs based 
  3.14  on the facility's most recent cost report; and 
  3.15     (2) for each nursing facility that does not report salaries 
  3.16  for registered nurses, licensed practical nurses, aides, 
  3.17  orderlies, and attendants separately, the payment rate 
  3.18  adjustment shall be computed using the facility's total 
  3.19  operating costs, separated into the categories specified in 
  3.20  paragraph (a) in proportion to the weighted average of all 
  3.21  facilities determined under clause (1), multiplied by the rate 
  3.22  increases specified in paragraph (b) or (c), and then dividing 
  3.23  the resulting amount by the nursing facility's actual resident 
  3.24  days. 
  3.25     (e) A nursing facility may apply for the 
  3.26  compensation-related payment rate adjustment calculated under 
  3.27  this subdivision.  The application must be made to the 
  3.28  commissioner and contain a plan by which the nursing facility 
  3.29  will distribute the compensation-related portion of the payment 
  3.30  rate adjustment to employees of the nursing facility.  For 
  3.31  nursing facilities in which the employees are represented by an 
  3.32  exclusive bargaining representative, an agreement negotiated and 
  3.33  agreed to by the employer and the exclusive bargaining 
  3.34  representative constitutes the plan.  For the second rate year, 
  3.35  a negotiated agreement constitutes the plan only if the 
  3.36  agreement is finalized after the date of enactment of all rate 
  4.1   increases for the second rate year.  The commissioner shall 
  4.2   review the plan to ensure that the payment rate adjustment per 
  4.3   diem is used as provided in paragraphs (a) to (c).  To be 
  4.4   eligible, a facility must submit its plan for the compensation 
  4.5   distribution by December 31 each year.  A facility may amend its 
  4.6   plan for the second rate year by submitting a revised plan by 
  4.7   December 31, 2000.  If a facility's plan for compensation 
  4.8   distribution is effective for its employees after July 1 of the 
  4.9   year that the funds are available, the payment rate adjustment 
  4.10  per diem shall be effective the same date as its plan. 
  4.11     (f) A copy of the approved distribution plan must be made 
  4.12  available to all employees.  This must be done by giving each 
  4.13  employee a copy or by posting it in an area of the nursing 
  4.14  facility to which all employees have access.  If an employee 
  4.15  does not receive the compensation adjustment described in their 
  4.16  facility's approved plan and is unable to resolve the problem 
  4.17  with the facility's management or through the employee's union 
  4.18  representative, the employee may contact the commissioner at an 
  4.19  address or phone number provided by the commissioner and 
  4.20  included in the approved plan.  
  4.21     (g) If the reimbursement system under section 256B.435 is 
  4.22  not implemented until July 1, 2001, the salary adjustment per 
  4.23  diem authorized in subdivision 2i, paragraph (c), shall continue 
  4.24  until June 30, 2001.  
  4.25     (h) For the rate year beginning July 1, 1999, the following 
  4.26  nursing facilities shall be allowed a rate increase equal to 67 
  4.27  percent of the rate increase that would be allowed if 
  4.28  subdivision 26, paragraph (a), was not applied: 
  4.29     (1) a nursing facility in Carver County licensed for 33 
  4.30  nursing home beds and four boarding care beds; 
  4.31     (2) a nursing facility in Faribault County licensed for 159 
  4.32  nursing home beds on September 30, 1998; and 
  4.33     (3) a nursing facility in Houston County licensed for 68 
  4.34  nursing home beds on September 30, 1998. 
  4.35     (i) For the rate year beginning July 1, 1999, the following 
  4.36  nursing facilities shall be allowed a rate increase equal to 67 
  5.1   percent of the rate increase that would be allowed if 
  5.2   subdivision 26, paragraphs (a) and (b), were not applied: 
  5.3      (1) a nursing facility in Chisago County licensed for 135 
  5.4   nursing home beds on September 30, 1998; and 
  5.5      (2) a nursing facility in Murray County licensed for 62 
  5.6   nursing home beds on September 30, 1998. 
  5.7      (j) For the rate year beginning July 1, 1999, a nursing 
  5.8   facility in Hennepin County licensed for 134 beds on September 
  5.9   30, 1998, shall: 
  5.10     (1) have the prior year's allowable care-related per diem 
  5.11  increased by $3.93 and the prior year's other operating cost per 
  5.12  diem increased by $1.69 before adding the inflation in 
  5.13  subdivision 26, paragraph (d), clause (2); and 
  5.14     (2) be allowed a rate increase equal to 67 percent of the 
  5.15  rate increase that would be allowed if subdivision 26, 
  5.16  paragraphs (a) and (b), were not applied. 
  5.17     The increases provided in paragraphs (h), (i), and (j) 
  5.18  shall be included in the facility's total payment rates for the 
  5.19  purposes of determining future rates under this section ~~or any~~ 
  5.20  ~~other section~~. 
  5.21     (k) For the rate years beginning on or after July 1, 2000, 
  5.22  a nursing home facility in Goodhue County that was licensed for 
  5.23  104 beds on February 1, 2000, shall have its employee pension 
  5.24  benefit costs reported on its Rule 50 cost report treated as 
  5.25  PERA contributions for the purpose of computing its payment 
  5.26  rates. 
  5.27     Sec. 2.  Minnesota Statutes 2002, section 256B.431, 
  5.28  subdivision 29, is amended to read: 
  5.29     Subd. 29.  [FACILITY RATE INCREASES EFFECTIVE JULY 1, 
  5.30  2000.] Following the determination under subdivision 28 of the 
  5.31  payment rate for the rate year beginning July 1, 2000, for a 
  5.32  facility in Roseau County licensed for 49 beds, the facility's 
  5.33  operating cost per diem shall be increased by the following 
  5.34  amounts: 
  5.35     (1) case mix class A, $1.97; 
  5.36     (2) case mix class B, $2.11; 
  6.1      (3) case mix class C, $2.26; 
  6.2      (4) case mix class D, $2.39; 
  6.3      (5) case mix class E, $2.54; 
  6.4      (6) case mix class F, $2.55; 
  6.5      (7) case mix class G, $2.66; 
  6.6      (8) case mix class H, $2.90; 
  6.7      (9) case mix class I, $2.97; 
  6.8      (10) case mix class J, $3.10; and 
  6.9      (11) case mix class K, $3.36. 
  6.10  These increases shall be included in the facility's total 
  6.11  payment rates for the purpose of determining future rates under 
  6.12  this section ~~or any other section~~. 
  6.13     Sec. 3.  Minnesota Statutes 2002, section 256B.431, 
  6.14  subdivision 30, is amended to read: 
  6.15     Subd. 30.  [BED LAYAWAY AND DELICENSURE.] (a) For rate 
  6.16  years beginning on ~~or after July 1, 2000~~ October 1, 2005, a 
  6.17  nursing facility reimbursed under this section which has placed 
  6.18  beds on layaway or removed beds from layaway, or delicensed beds 
  6.19  shall, for purposes of ~~application of the downsizing incentive~~ 
  6.20  ~~in subdivision 3a, paragraph (c), and calculation of the rental~~ 
  6.21  ~~per diem~~ determination of the payment rate for property-related 
  6.22  costs under section 256B.440, subdivision 63, have those 
  6.23  beds placed in layaway given the same effect as if the beds had 
  6.24  been delicensed so long as the beds remain on layaway, and have 
  6.25  the number of beds used in the calculation in section 256B.440, 
  6.26  subdivision 63, paragraph (f), be based on the number of 
  6.27  licensed beds less the number that are in layaway.  ~~At the time~~ 
  6.28  ~~of a layaway, a facility may change its single bed election for~~ 
  6.29  ~~use in calculating capacity days under Minnesota Rules, part~~ 
  6.30  ~~9549.0060, subpart 11.~~  The property payment rate 
  6.31  ~~increase~~ changes shall be effective ~~the first day of the month~~ 
  6.32  ~~following the month in which~~ April 1 for the layaway of the beds 
  6.33  ~~becomes~~, the removal of beds from layaway, and the delicensure 
  6.34  of beds that become effective under section 144A.071, 
  6.35  subdivision 4b, between the prior August 1 and January 31.  The 
  6.36  property payment rate changes shall be effective October 1 for 
  7.1   the layaway of the beds, the removal of beds from layaway, and 
  7.2   the delicensure of beds that become effective under section 
  7.3   144A.071, subdivision 4b, between the prior February 1 and July 
  7.4   31. 
  7.5      ~~(b) For rate years beginning on or after July 1, 2000,~~ 
  7.6   ~~notwithstanding any provision to the contrary under section~~ 
  7.7   ~~256B.434, a nursing facility reimbursed under that section which~~ 
  7.8   ~~has placed beds on layaway shall, for so long as the beds remain~~ 
  7.9   ~~on layaway, be allowed to:~~ 
  7.10     ~~(1) aggregate the applicable investment per bed limits~~ 
  7.11  ~~based on the number of beds licensed immediately prior to~~ 
  7.12  ~~entering the alternative payment system;~~ 
  7.13     ~~(2) retain or change the facility's single bed election for~~ 
  7.14  ~~use in calculating capacity days under Minnesota Rules, part~~ 
  7.15  ~~9549.0060, subpart 11; and~~ 
  7.16     ~~(3) establish capacity days based on the number of beds~~ 
  7.17  ~~immediately prior to the layaway and the number of beds after~~ 
  7.18  ~~the layaway.~~ 
  7.19  ~~The commissioner shall increase the facility's property payment~~ 
  7.20  ~~rate by the incremental increase in the rental per diem~~ 
  7.21  ~~resulting from the recalculation of the facility's rental per~~ 
  7.22  ~~diem applying only the changes resulting from the layaway of~~ 
  7.23  ~~beds and clauses (1), (2), and (3).  If a facility reimbursed~~ 
  7.24  ~~under section 256B.434 completes a moratorium exception project~~ 
  7.25  ~~after its base year, the base year property rate shall be the~~ 
  7.26  ~~moratorium project property rate.  The base year rate shall be~~ 
  7.27  ~~inflated by the factors in section 256B.434, subdivision 4,~~ 
  7.28  ~~paragraph (c).  The property payment rate increase shall be~~ 
  7.29  ~~effective the first day of the month following the month in~~ 
  7.30  ~~which the layaway of the beds becomes effective.~~ 
  7.31     ~~(c) If a nursing facility removes a bed from layaway status~~ 
  7.32  ~~in accordance with section 144A.071, subdivision 4b, the~~ 
  7.33  ~~commissioner shall establish capacity days based on the number~~ 
  7.34  ~~of licensed and certified beds in the facility not on layaway~~ 
  7.35  ~~and shall reduce the nursing facility's property payment rate in~~ 
  7.36  ~~accordance with paragraph (b).~~ 
  8.1      ~~(d) For the rate years beginning on or after July 1, 2000,~~ 
  8.2   ~~notwithstanding any provision to the contrary under section~~ 
  8.3   ~~256B.434, a nursing facility reimbursed under that section,~~ 
  8.4   ~~which has delicensed beds after July 1, 2000, by giving notice~~ 
  8.5   ~~of the delicensure to the commissioner of health according to~~ 
  8.6   ~~the notice requirements in section 144A.071, subdivision 4b,~~ 
  8.7   ~~shall be allowed to:~~ 
  8.8      ~~(1) aggregate the applicable investment per bed limits~~ 
  8.9   ~~based on the number of beds licensed immediately prior to~~ 
  8.10  ~~entering the alternative payment system;~~ 
  8.11     ~~(2) retain or change the facility's single bed election for~~ 
  8.12  ~~use in calculating capacity days under Minnesota Rules, part~~ 
  8.13  ~~9549.0060, subpart 11; and~~ 
  8.14     ~~(3) establish capacity days based on the number of beds~~ 
  8.15  ~~immediately prior to the delicensure and the number of beds~~ 
  8.16  ~~after the delicensure.~~ 
  8.17  ~~The commissioner shall increase the facility's property payment~~ 
  8.18  ~~rate by the incremental increase in the rental per diem~~ 
  8.19  ~~resulting from the recalculation of the facility's rental per~~ 
  8.20  ~~diem applying only the changes resulting from the delicensure of~~ 
  8.21  ~~beds and clauses (1), (2), and (3).  If a facility reimbursed~~ 
  8.22  ~~under section 256B.434 completes a moratorium exception project~~ 
  8.23  ~~after its base year, the base year property rate shall be the~~ 
  8.24  ~~moratorium project property rate.  The base year rate shall be~~ 
  8.25  ~~inflated by the factors in section 256B.434, subdivision 4,~~ 
  8.26  ~~paragraph (c).  The property payment rate increase shall be~~ 
  8.27  ~~effective the first day of the month following the month in~~ 
  8.28  ~~which the delicensure of the beds becomes effective.~~ 
  8.29     ~~(e) For nursing facilities reimbursed under this section or~~ 
  8.30  ~~section 256B.434, any beds placed on layaway shall not be~~ 
  8.31  ~~included in calculating facility occupancy as it pertains to~~ 
  8.32  ~~leave days defined in Minnesota Rules, part 9505.0415.~~ 
  8.33     ~~(f) For nursing facilities reimbursed under this section or~~ 
  8.34  ~~section 256B.434, the rental rate calculated after placing beds~~ 
  8.35  ~~on layaway may not be less than the rental rate prior to placing~~ 
  8.36  ~~beds on layaway.~~ 
  9.1      ~~(g)~~ (b) A nursing facility receiving a rate adjustment as a 
  9.2   result of this section shall comply with section 256B.47, 
  9.3   subdivision 2. 
  9.4      ~~(h) A facility that does not utilize the space made~~ 
  9.5   ~~available as a result of bed layaway or delicensure under this~~ 
  9.6   ~~subdivision to reduce the number of beds per room or provide~~ 
  9.7   ~~more common space for nursing facility uses or perform other~~ 
  9.8   ~~activities related to the operation of the nursing facility~~ 
  9.9   ~~shall have its property rate increase calculated under this~~ 
  9.10  ~~subdivision reduced by the ratio of the square footage made~~ 
  9.11  ~~available that is not used for these purposes to the total~~ 
  9.12  ~~square footage made available as a result of bed layaway or~~ 
  9.13  ~~delicensure.~~ 
  9.14     Sec. 4.  Minnesota Statutes 2002, section 256B.431, 
  9.15  subdivision 35, is amended to read: 
  9.16     Subd. 35.  [EXCLUSION OF RAW FOOD COST ADJUSTMENT.] For 
  9.17  rate years beginning on or after July 1, 2001, in calculating a 
  9.18  nursing facility's operating cost per diem for the purposes of 
  9.19  constructing an array, determining a median, or otherwise 
  9.20  performing a statistical measure of nursing facility payment 
  9.21  rates to be used to determine future rate increases under this 
  9.22  section, section 256B.434, or any other section, the 
  9.23  commissioner shall exclude adjustments for raw food costs under 
  9.24  subdivision 2b, paragraph (h), that are related to providing 
  9.25  special diets based on religious beliefs.  For rates determined 
  9.26  under section 256B.440, the amount determined under subdivision 
  9.27  2b, paragraph (h), shall not be included in the support services 
  9.28  per diem cost determined in section 256B.440, subdivision 56, 
  9.29  and shall be added to the external fixed cost costs payment rate 
  9.30  determined in section 246B.440, subdivision 62, paragraph (i). 
  9.31     Sec. 5.  Minnesota Statutes 2002, section 256B.432, 
  9.32  subdivision 1, is amended to read: 
  9.33     Subdivision 1.  [DEFINITIONS.] For purposes of this 
  9.34  section, the following terms have the meanings given them. 
  9.35     (a) "Management agreement" means an agreement in which one 
  9.36  or more of the following criteria exist:  
 10.1      (1) the central, affiliated, or corporate office has or is 
 10.2   authorized to assume day-to-day operational control of the 
 10.3   nursing facility for any six-month period within a 24-month 
 10.4   period.  "Day-to-day operational control" means that the 
 10.5   central, affiliated, or corporate office has the authority to 
 10.6   require, mandate, direct, or compel the employees of the nursing 
 10.7   facility to perform or refrain from performing certain acts, or 
 10.8   to supplant or take the place of the top management of the 
 10.9   nursing facility.  "Day-to-day operational control" includes the 
 10.10  authority to hire or terminate employees or to provide an 
 10.11  employee of the central, affiliated, or corporate office to 
 10.12  serve as administrator of the nursing facility; 
 10.13     (2) the central, affiliated, or corporate office performs 
 10.14  or is authorized to perform two or more of the following:  the 
 10.15  execution of contracts; authorization of purchase orders; 
 10.16  signature authority for checks, notes, or other financial 
 10.17  instruments; requiring the nursing facility to use the group or 
 10.18  volume purchasing services of the central, affiliated, or 
 10.19  corporate office; or the authority to make annual capital 
 10.20  expenditures for the nursing facility exceeding $50,000, or $500 
 10.21  per licensed bed, whichever is less, without first securing the 
 10.22  approval of the nursing facility board of directors; 
 10.23     (3) the central, affiliated, or corporate office becomes or 
 10.24  is required to become the licensee under applicable state law; 
 10.25     (4) the agreement provides that the compensation for 
 10.26  services provided under the agreement is directly related to any 
 10.27  profits made by the nursing facility; or 
 10.28     (5) the nursing facility entering into the agreement is 
 10.29  governed by a governing body that meets fewer than four times a 
 10.30  year, that does not publish notice of its meetings, or that does 
 10.31  not keep formal records of its proceedings.  
 10.32     (b) "Consulting agreement" means any agreement the purpose 
 10.33  of which is for a central, affiliated, or corporate office to 
 10.34  advise, counsel, recommend, or suggest to the owner or operator 
 10.35  of the nonrelated nursing facility measures and methods for 
 10.36  improving the operations of the nursing facility.  
 11.1      (c) "Nursing facility" means a nursing facility whose 
 11.2   medical assistance rates are determined according to section 
 11.3   ~~256B.431~~ 256B.440. 
 11.4      Sec. 6.  Minnesota Statutes 2002, section 256B.432, 
 11.5   subdivision 2, is amended to read: 
 11.6      Subd. 2.  [EFFECTIVE DATE.] For rate years beginning on or 
 11.7   after July 1, 1990, the central, affiliated, or corporate office 
 11.8   cost allocations in subdivisions 3 to 6 must be used when 
 11.9   determining medical assistance rates under section ~~256B.431~~ 
 11.10  256B.440.  
 11.11     Sec. 7.  Minnesota Statutes 2002, section 256B.432, is 
 11.12  amended by adding a subdivision to read: 
 11.13     Subd. 4a.  [ALLOCATION; COSTS ALLOCABLE ON A FUNCTIONAL 
 11.14  BASIS.] (a) Costs that have not been directly identified must be 
 11.15  allocated to nursing facilities on a basis designed to equitably 
 11.16  allocate the costs to the nursing facilities or activities 
 11.17  receiving the benefits of the costs.  This allocation must be 
 11.18  made in a manner reasonably related to the services received by 
 11.19  the nursing facilities.  Where practical and the amounts are 
 11.20  material, these costs must be allocated on a functional basis.  
 11.21  The functions, or cost centers used to allocate central office 
 11.22  costs, and the unit bases used to allocate the costs, including 
 11.23  those central office costs allocated according to subdivision 5, 
 11.24  must be used consistently from one central office accounting 
 11.25  period to another. 
 11.26     (b) If the central office wishes to change its allocation 
 11.27  bases and believes the change will result in more appropriate 
 11.28  and more accurate allocations, the central office must make a 
 11.29  written request, with its justification, to the commissioner for 
 11.30  approval of the change no later than 120 days after the 
 11.31  beginning of the central office accounting period to which the 
 11.32  change is to apply.  The commissioner's approval of a central 
 11.33  office request will be furnished to the central office in 
 11.34  writing.  Where the commissioner approves the central office 
 11.35  request, the change must be applied to the accounting period for 
 11.36  which the request was made, and to all subsequent central office 
 12.1   accounting periods unless the commissioner approves a subsequent 
 12.2   request for change by the central office.  The effective date of 
 12.3   the change will be the beginning of the accounting period for 
 12.4   which the request was made. 
 12.5      Sec. 8.  Minnesota Statutes 2002, section 256B.432, 
 12.6   subdivision 5, is amended to read: 
 12.7      Subd. 5.  [ALLOCATION OF REMAINING COSTS; ALLOCATION 
 12.8   RATIO.] (a) After the costs that can be directly identified 
 12.9   according to subdivisions 3 and 4 have been allocated, the 
 12.10  remaining central, affiliated, or corporate office costs must be 
 12.11  allocated between the nursing facility operations and the other 
 12.12  activities or facilities unrelated to the nursing facility 
 12.13  operations based on the ratio of total operating 
 12.14  costs.  However, in the event that these remaining costs are 
 12.15  partially attributable to the start-up of home and 
 12.16  community-based services intended to fill a gap identified by 
 12.17  the local agency, the facility may assign these remaining costs 
 12.18  to the appropriate cost category of the facility for a period 
 12.19  not to exceed two years. 
 12.20     (b) For purposes of allocating these remaining central, 
 12.21  affiliated, or corporate office costs, the numerator for the 
 12.22  allocation ratio shall be determined as follows:  
 12.23     (1) for nursing facilities that are related organizations 
 12.24  or are controlled by a central, affiliated, or corporate office 
 12.25  under a management agreement, the numerator of the allocation 
 12.26  ratio shall be equal to the sum of the total operating costs 
 12.27  incurred by each related organization or controlled nursing 
 12.28  facility; 
 12.29     (2) for a central, affiliated, or corporate office 
 12.30  providing goods or services to related organizations that are 
 12.31  not nursing facilities, the numerator of the allocation ratio 
 12.32  shall be equal to the sum of the total operating costs incurred 
 12.33  by the nonnursing facility related organizations; 
 12.34     (3) for a central, affiliated, or corporate office 
 12.35  providing goods or services to unrelated nursing facilities 
 12.36  under a consulting agreement, the numerator of the allocation 
 13.1   ratio shall be equal to the greater of directly identified 
 13.2   central, affiliated, or corporate costs or the contracted 
 13.3   amount; or 
 13.4      (4) for business activities that involve the providing of 
 13.5   goods or services to unrelated parties which are not nursing 
 13.6   facilities, the numerator of the allocation ratio shall be equal 
 13.7   to the greater of directly identified costs or revenues 
 13.8   generated by the activity or function.  
 13.9      (c) The denominator for the allocation ratio is the sum of 
 13.10  the numerators in paragraph (b), clauses (1) to (4). 
 13.11     Sec. 9.  Minnesota Statutes 2002, section 256B.432, is 
 13.12  amended by adding a subdivision to read: 
 13.13     Subd. 6a.  [RELATED ORGANIZATION COSTS.] Costs applicable 
 13.14  to services, capital assets, and supplies directly or indirectly 
 13.15  furnished to the nursing facility by any related organization 
 13.16  are includable in the allowable cost of the nursing facility at 
 13.17  the purchase price paid by the related organization for capital 
 13.18  assets or supplies and at the cost incurred by the related 
 13.19  organization for the provision of services to the nursing 
 13.20  facility if these prices or costs do not exceed the price of 
 13.21  comparable services, capital assets, or supplies that could be 
 13.22  purchased elsewhere.  For this purpose, the related 
 13.23  organization's costs must not include an amount for markup or 
 13.24  profit. 
 13.25     If the related organization in the normal course of 
 13.26  business sells services, capital assets, or supplies to 
 13.27  nonrelated organizations, the cost to the nursing facility shall 
 13.28  be the nonrelated organization's price provided that sales to 
 13.29  nonrelated organizations constitute at least 50 percent of total 
 13.30  annual sales of similar services, capital assets, or supplies. 
 13.31     Sec. 10.  Minnesota Statutes 2002, section 256B.434, 
 13.32  subdivision 4a, is amended to read: 
 13.33     Subd. 4a.  [FACILITY RATE INCREASES.] For the rate year 
 13.34  beginning July 1, 1999, the nursing facilities described in 
 13.35  clauses (1) to (5) shall receive the rate increases indicated.  
 13.36  The increases provided under this subdivision shall be included 
 14.1   in the facility's total payment rates for the purpose of 
 14.2   determining future rates under this section ~~or any other section~~:
 14.3      (1) a nursing facility in Becker County licensed for 102 
 14.4   nursing home beds on September 30, 1998, shall receive an 
 14.5   increase of $1.30 in its case mix class A payment rate; an 
 14.6   increase of $1.33 in its case mix class B payment rate; an 
 14.7   increase of $1.36 in its case mix class C payment rate; an 
 14.8   increase of $1.39 in its case mix class D payment rate; an 
 14.9   increase of $1.42 in its case mix class E payment rate; an 
 14.10  increase of $1.42 in its case mix class F payment rate; an 
 14.11  increase of $1.45 in its case mix class G payment rate; an 
 14.12  increase of $1.49 in its case mix class H payment rate; an 
 14.13  increase of $1.51 in its case mix class I payment rate; an 
 14.14  increase of $1.54 in its case mix class J payment rate; and an 
 14.15  increase of $1.59 in its case mix class K payment rate; 
 14.16     (2) a nursing facility in Chisago County licensed for 101 
 14.17  nursing home beds on September 30, 1998, shall receive an 
 14.18  increase of $3.67 in each case mix payment rate; 
 14.19     (3) a nursing facility in Canby, licensed for 75 beds shall 
 14.20  have its property-related per diem rate increased by $1.21.  
 14.21  This increase shall be recognized in the facility's contract 
 14.22  payment rate under this section; 
 14.23     (4) a nursing facility in Golden Valley with all its beds 
 14.24  licensed to provide residential rehabilitative services to young 
 14.25  adults under Minnesota Rules, parts 9570.2000 to 9570.3400, 
 14.26  shall have the payment rate computed according to this section 
 14.27  increased by $14.83; and 
 14.28     (5) a county-owned 130-bed nursing facility in Park Rapids 
 14.29  shall have its per diem contract payment rate increased by $1.02 
 14.30  for costs related to compliance with comparable worth 
 14.31  requirements.  
 14.32     Sec. 11.  Minnesota Statutes 2002, section 256B.434, 
 14.33  subdivision 4b, is amended to read: 
 14.34     Subd. 4b.  [FACILITY RATE INCREASES EFFECTIVE JULY 1, 
 14.35  2000.] For the rate year beginning July 1, 2000, the nursing 
 14.36  facilities described in clauses (1) to (6) shall receive the 
 15.1   rate increases indicated.  The increases under this subdivision 
 15.2   shall be added following the determination under section 
 15.3   256B.431, subdivision 28, of the payment rate for the rate year 
 15.4   beginning July 1, 2000, and shall be included in the facility's 
 15.5   total payment rates for the purposes of determining future rates 
 15.6   under this section ~~or any other section~~: 
 15.7      (1) a nursing facility in Hennepin County licensed for 290 
 15.8   beds shall receive an operating cost per diem increase of 5.9 
 15.9   percent, provided that the facility delicenses, decertifies, or 
 15.10  places on layaway status, if that status is otherwise permitted 
 15.11  by law, 70 beds; 
 15.12     (2) a nursing facility in Goodhue County licensed for 84 
 15.13  beds shall receive an increase of $1.54 in each case mix payment 
 15.14  rate; 
 15.15     (3) a nursing facility located in Rochester and licensed 
 15.16  for 103 beds on January 1, 2000, shall receive an increase in 
 15.17  its case mix resident class A payment of $3.78, and an increase 
 15.18  in the payment rate for all other case mix classes of that 
 15.19  amount multiplied by the class weight for that case mix class 
 15.20  established in Minnesota Rules, part 9549.0058, subpart 3; 
 15.21     (4) a nursing facility in Wright County licensed for 154 
 15.22  beds shall receive an increase of $2.03 in each case mix payment 
 15.23  rate to be used for employee wage and benefit enhancements; 
 15.24     (5) a facility in Todd County licensed for 78 beds, shall 
 15.25  have its operating cost per diem increased by the following 
 15.26  amounts: 
 15.27     (i) case mix class A, $1.16; 
 15.28     (ii) case mix class B, $1.50; 
 15.29     (iii) case mix class C, $1.89; 
 15.30     (iv) case mix class D, $2.26; 
 15.31     (v) case mix class E, $2.63; 
 15.32     (vi) case mix class F, $2.65; 
 15.33     (vii) case mix class G, $2.96; 
 15.34     (viii) case mix class H, $3.55; 
 15.35     (ix) case mix class I, $3.76; 
 15.36     (x) case mix class J, $4.08; and 
 16.1      (xi) case mix class K, $4.76; and 
 16.2      (6) a nursing facility in Pine City that decertified 22 
 16.3   beds in calendar year 1999 shall have its property-related per 
 16.4   diem payment rate increased by $1.59. 
 16.5      Sec. 12.  Minnesota Statutes 2002, section 256B.434, 
 16.6   subdivision 4c, is amended to read: 
 16.7      Subd. 4c.  [FACILITY RATE INCREASES EFFECTIVE JANUARY 1, 
 16.8   2002.] For the rate period beginning January 1, 2002, and for 
 16.9   the rate year beginning July 1, 2002, a nursing facility in 
 16.10  Morrison County licensed for 83 beds as of March 1, 2001, shall 
 16.11  receive an increase of $2.54 in each case mix payment rate to 
 16.12  offset property tax payments due as a result of the facility's 
 16.13  conversion from nonprofit to for-profit status.  The increase 
 16.14  under this subdivision shall be added following the 
 16.15  determination under this chapter of the payment rate for the 
 16.16  rate year beginning July 1, 2001, and shall be included in the 
 16.17  facility's total payment rates for the purposes of determining 
 16.18  future rates under this section ~~or any other section~~. 
 16.19     Sec. 13.  Minnesota Statutes 2002, section 256B.434, 
 16.20  subdivision 4d, is amended to read: 
 16.21     Subd. 4d.  [FACILITY RATE INCREASES EFFECTIVE JULY 1, 
 16.22  2001.] For the rate year beginning July 1, 2001, a nursing 
 16.23  facility in Hennepin County licensed for 302 beds shall receive 
 16.24  an increase of 29 cents in each case mix payment rate to correct 
 16.25  an error in the cost-reporting system that occurred prior to the 
 16.26  date that the facility entered the alternative payment 
 16.27  demonstration project.  The increase under this subdivision 
 16.28  shall be added following the determination under this chapter of 
 16.29  the payment rate for the rate year beginning July 1, 2001, and 
 16.30  shall be included in the facility's total payment rates for the 
 16.31  purposes of determining future rates under this section ~~or any~~ 
 16.32  ~~other section~~. 
 16.33     Sec. 14.  Minnesota Statutes 2002, section 256B.434, is 
 16.34  amended by adding a subdivision to read: 
 16.35     Subd. 18.  [PHASE-OUT OF ALTERNATIVE PAYMENT SYSTEM 
 16.36  CONTRACTS.] Nursing facilities that have entered into a contract 
 17.1   with the commissioner under the provisions of this section will 
 17.2   cease their contractual agreement with the commissioner 12 
 17.3   months following the effective date of the contract in effect on 
 17.4   October 1, 2005.  Nursing facilities with a contract in effect 
 17.5   on October 1, 2005, shall be paid the contract payment rate for 
 17.6   the remainder of the phase-in period according to the provisions 
 17.7   of section 256B.440, subdivision 65, except as provided in 
 17.8   section 256B.440, subdivision 63, paragraph (i). 
 17.9      Sec. 15.  [256B.440] [NURSING FACILITY REIMBURSEMENT SYSTEM 
 17.10  EFFECTIVE OCTOBER 1, 2005.] 
 17.11     Subdivision 1.  [IN GENERAL.] (a) The commissioner shall 
 17.12  establish a value-based nursing facility reimbursement system 
 17.13  which will provide facility-specific, prospective rates for 
 17.14  nursing facilities participating in the medical assistance 
 17.15  program.  The rates shall be determined using an annual 
 17.16  statistical and cost report filed by each nursing facility.  The 
 17.17  total payment rate shall be composed of four cost categories:  
 17.18  case mix adjusted, support services, external fixed, and 
 17.19  property-related costs.  The payment rate shall be derived from 
 17.20  statistical measures of actual costs incurred in facility 
 17.21  operation of nursing facilities.  From this cost basis, the 
 17.22  components of the total payment rate shall be adjusted for 
 17.23  quality of services provided, actual costs of operation of each 
 17.24  facility, geographic variation in labor costs, rental value, and 
 17.25  acuity. 
 17.26     (b) Rates shall be rebased annually.  Each cost reporting 
 17.27  year shall begin on October 1 and end on the following September 
 17.28  30.  A cost report shall be filed by each nursing facility by 
 17.29  January 15.  Notice of rates shall be distributed by August 15 
 17.30  and the rates shall go into effect on October 1 for one year. 
 17.31     (c) Nursing facilities shall file the first statistical and 
 17.32  cost report on or before January 15, 2005.  The commissioner 
 17.33  shall begin to phase in the new reimbursement system beginning 
 17.34  October 1, 2005.  Full phase-in shall be complete by October 1, 
 17.35  2008. 
 17.36     Subd. 2.  [DEFINITIONS.] For purposes of this section, the 
 18.1   terms in subdivisions 3 to 53 have the meanings given unless 
 18.2   otherwise provided for in this section. 
 18.3      Subd. 3.  [ACTIVE BEDS.] "Active beds" means licensed beds 
 18.4   that are not currently in layaway status. 
 18.5      Subd. 4.  [ACTIVITIES COSTS.] "Activities costs" means 
 18.6   costs for the salaries and wages of the supervisor and other 
 18.7   activities workers, associated fringe benefits and payroll 
 18.8   taxes, supplies, services, and consultants. 
 18.9      Subd. 5.  [ADMINISTRATIVE COSTS.] "Administrative costs" 
 18.10  means the direct costs for administering the overall activities 
 18.11  of the nursing home.  These costs include salaries and wages of 
 18.12  the commissioner, assistant administrator, and business office 
 18.13  employees, and associated fringe benefits and payroll taxes, 
 18.14  fees, contracts, or purchases related to business office 
 18.15  functions, licenses, and permits except as provided in the 
 18.16  external fixed costs category, employee recognition, travel 
 18.17  including meals and lodging, training, voice and data 
 18.18  communication or transmission, office supplies, liability 
 18.19  insurance and other forms of insurance not designated to other 
 18.20  areas, personnel recruitment, legal services, accounting 
 18.21  services, management or business consultants, data processing, 
 18.22  central or home office costs, business meetings and seminars, 
 18.23  postage, fees for professional organizations, subscriptions, 
 18.24  security services, advertising, board of director's fees, 
 18.25  working capital interest expense, and bad debts and bad debt 
 18.26  collection fees. 
 18.27     Subd. 6.  [ALLOWED COSTS.] "Allowed costs" means the 
 18.28  amounts reported by the facility which are necessary for the 
 18.29  operation of the facility and the care of residents and which 
 18.30  are reviewed by the department for accuracy, reasonableness, and 
 18.31  compliance with this section and generally accepted accounting 
 18.32  principles. 
 18.33     Subd. 7.  [CENTER FOR MEDICARE AND MEDICAID 
 18.34  SERVICES.] "Center for Medicare and Medicaid services" means the 
 18.35  federal agency, in the United States Department of Health and 
 18.36  Human Services that administers Medicaid, also referred to as 
 19.1   "CMS." 
 19.2      Subd. 8.  [COMMISSIONER.] "Commissioner" means the 
 19.3   commissioner of human services unless specified otherwise. 
 19.4      Subd. 9.  [DEPRECIATION GUIDELINES.] "Depreciation 
 19.5   guidelines" means the most recent publication of "The Estimated 
 19.6   Useful Lives of Depreciable Hospital Assets," issued by the 
 19.7   American Hospital Association, 840 North Lake Shore Drive, 
 19.8   Chicago, Illinois 60611. 
 19.9      Subd. 10.  [DESK AUDIT.] "Desk audit" means the 
 19.10  establishment of the payment rate based on the commissioner's 
 19.11  review and analysis of required reports, supporting 
 19.12  documentation, and work sheets submitted by the nursing facility.
 19.13     Subd. 11.  [DIETARY COSTS.] "Dietary costs" means the 
 19.14  salaries and wages of the dietary supervisor, dietitians, chefs, 
 19.15  cooks, dishwashers, and other employees assigned to the kitchen 
 19.16  and dining room, and associated fringe benefits and payroll 
 19.17  taxes.  Dietary costs also includes the salaries or fees of 
 19.18  dietary consultants, direct costs of raw food (both normal and 
 19.19  special diet food), dietary supplies, and food preparation and 
 19.20  serving.  Also included are special dietary supplements used for 
 19.21  tube feeding or oral feeding, such as elemental high nitrogen 
 19.22  diet, even if written as a prescription item by a physician. 
 19.23     Subd. 12.  [DIRECT CARE COSTS CATEGORY.] "Direct care costs 
 19.24  category" means costs for nursing services, activities, and 
 19.25  social services. 
 19.26     Subd. 13.  [EFFECTIVE AGE.] "Effective age" means the age 
 19.27  of a nursing facility adjusted for improvements made to the 
 19.28  property since it was originally constructed, purchased, or 
 19.29  leased. 
 19.30     Subd. 14.  [EXTERNAL FIXED COSTS CATEGORY.] "External fixed 
 19.31  costs category" means costs related to the nursing home 
 19.32  surcharge under section 256.9657, subdivision 1; licensure fees 
 19.33  under section 144.122; long-term care consultation fees under 
 19.34  section 256B.0911, subdivision 6; family advisory council fee 
 19.35  under section 144A.35; scholarships under section 256B.431, 
 19.36  subdivision 36; planned closure rate adjustments under section 
 20.1   256B.437, subdivision 6; property taxes and property insurance; 
 20.2   PERA; and equipment allowance. 
 20.3      Subd. 15.  [FACILITY AVERAGE CASE MIX INDEX 
 20.4   (CMI).] "Facility average case mix index" or "CMI" means a 
 20.5   numerical value score that describes the relative resource use 
 20.6   for all residents within the groups under the resource 
 20.7   utilization group (RUG-III) classification system prescribed by 
 20.8   the commissioner based on an assessment of each resident.  The 
 20.9   facility average CMI shall be computed as the standardized days 
 20.10  divided by total days for all residents in the facility. 
 20.11     Subd. 16.  [FIELD AUDIT.] "Field audit" means the on-site 
 20.12  examination, verification, and review of the financial records, 
 20.13  statistical records, and related supporting documentation on the 
 20.14  nursing home and any related organization. 
 20.15     Subd. 17.  [FINAL RATE.] "Final rate" means the rate 
 20.16  established after any adjustment by the commissioner, including, 
 20.17  but not limited to, adjustments resulting from cost report 
 20.18  reviews and field audits. 
 20.19     Subd. 18.  [FRINGE BENEFIT COSTS.] "Fringe benefit costs" 
 20.20  means group life, health, dental, and workers' compensation 
 20.21  insurance, and pension, profit-sharing, and retirement plans 
 20.22  generally available to all employees who work at least 20 hours 
 20.23  per week. 
 20.24     Subd. 19.  [GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.] 
 20.25  "Generally Accepted Accounting Principles" means the body of 
 20.26  pronouncements adopted by the American Institute of Certified 
 20.27  Public Accountants regarding proper accounting procedures, 
 20.28  guidelines, and rules. 
 20.29     Subd. 20.  [HISTORICAL COST.] "Historical cost" means the 
 20.30  direct costs incurred by the nursing facility of acquiring 
 20.31  services, supplies, or assets. 
 20.32     Subd. 21.  [HOSPITAL-ATTACHED NURSING FACILITY STATUS.] (a) 
 20.33  For the purpose of setting rates under this section, for rate 
 20.34  years beginning after June 30, 2005, "hospital-attached nursing 
 20.35  facility" means a nursing facility which meets the requirements 
 20.36  of clauses (1) and (2), or (3) or (4): 
 21.1      (1) the nursing facility is recognized by the federal 
 21.2   Medicare program to be a hospital-based nursing facility; 
 21.3      (2) the hospital and nursing facility are physically 
 21.4   attached or connected by a corridor; 
 21.5      (3) a nursing facility and hospital, which have applied for 
 21.6   hospital-based nursing facility status under the federal 
 21.7   Medicare program during the reporting year, shall be considered 
 21.8   a hospital-attached nursing facility for purposes of setting 
 21.9   payment rates under this section.  The nursing facility must 
 21.10  file its cost report for that reporting year using Medicare 
 21.11  principles and Medicare's recommended cost allocation methods 
 21.12  had the Medicare program's hospital-based nursing facility 
 21.13  status been granted to the nursing facility.  For each 
 21.14  subsequent rate year, the nursing facility must meet the 
 21.15  definition requirements in clauses (1) and (2).  If the nursing 
 21.16  facility is denied hospital-based nursing facility status under 
 21.17  the Medicare program, the nursing facility's payment rates for 
 21.18  the rate years the nursing facility was considered to be a 
 21.19  hospital-attached nursing facility according to this paragraph 
 21.20  shall be recalculated treating the nursing facility as a 
 21.21  non-hospital-attached nursing facility; 
 21.22     (4) if a nonprofit or community-operated hospital and 
 21.23  attached nursing facility suspend operation of the hospital, the 
 21.24  remaining nursing facility must be allowed to continue its 
 21.25  status as hospital-attached for rate calculations in the three 
 21.26  rate years subsequent to the one in which the hospital ceased 
 21.27  operations. 
 21.28     (b) The nursing facility's cost report filed as 
 21.29  hospital-attached facility shall use the same cost allocation 
 21.30  principles and methods used in the reports filed for the 
 21.31  Medicare program.  Direct identification of costs to the nursing 
 21.32  facility cost center will be permitted only when the comparable 
 21.33  hospital costs have also been directly identified to a cost 
 21.34  center which is not allocated to the nursing facility. 
 21.35     Subd. 22.  [HOUSEKEEPING COSTS.] "Housekeeping costs" means 
 21.36  the salaries and wages of the housekeeping supervisor, 
 22.1   housekeepers, and other cleaning employees and associated fringe 
 22.2   benefits and payroll taxes.  It also includes the cost of 
 22.3   housekeeping supplies, including cleaning and lavatory supplies 
 22.4   and contract services. 
 22.5      Subd. 23.  [LAUNDRY COSTS.] "Laundry costs" means the 
 22.6   salaries and wages of the laundry supervisor and other laundry 
 22.7   employees, associated fringe benefits, and payroll taxes.  It 
 22.8   also includes the costs of linen and bedding, the laundering of 
 22.9   resident clothing, laundry supplies, and contract services. 
 22.10     Subd. 24.  [LICENSEE.] "Licensee" means the individual or 
 22.11  organization listed on the form issued by the Minnesota 
 22.12  Department of Health under chapter 144A. 
 22.13     Subd. 25.  [MAINTENANCE AND PLANT OPERATIONS 
 22.14  COSTS.] "Maintenance and plant operations costs" means the 
 22.15  salaries and wages of the maintenance supervisor, engineers, 
 22.16  heating-plant employees, and other maintenance employees and 
 22.17  associated fringe benefits and payroll taxes.  It also includes 
 22.18  direct costs for maintenance and operation of the building and 
 22.19  grounds, including fuel, electricity, medical waste and garbage 
 22.20  removal, water, sewer, supplies, tools, and repairs. 
 22.21     Subd. 26.  [METROPOLITAN STATISTICAL AREA OR MSA.] 
 22.22  "Metropolitan statistical area" or "MSA" means a regional area 
 22.23  as determined by the centers for Medicare and Medicaid services. 
 22.24     Subd. 27.  [MOVABLE EQUIPMENT.] "Movable equipment" means 
 22.25  the direct cost to the nursing facility to purchase items listed 
 22.26  as major movable equipment in the depreciation guidelines and 
 22.27  technology.  Technology, used directly for resident care, is 
 22.28  defined in section 144A.071, subdivision 1a, paragraph (j). 
 22.29     Subd. 28.  [MULTIPLE BED ROOM.] "Multiple bed room" means a 
 22.30  room with two or more licensed beds that does not meet the 
 22.31  definition of a split-double bed room. 
 22.32     Subd. 29.  [NORMALIZED DIRECT CARE COSTS.] "Normalized 
 22.33  direct care costs" means direct care costs divided by 
 22.34  standardized days.  It is the costs for direct care services 
 22.35  associated with a RUGs index of 1.00. 
 22.36     Subd. 30.  [NURSING COSTS.] "Nursing costs" means costs for 
 23.1   the wages of nursing administration, staff education, and direct 
 23.2   care registered nurses, licensed practical nurses, certified 
 23.3   nursing assistants, and trained medication aides; mental health 
 23.4   workers and other direct care employees, and associated fringe 
 23.5   benefits and payroll taxes; services from a supplemental nursing 
 23.6   services agency and supplies that are stocked at nursing 
 23.7   stations or on the floor and distributed or used individually, 
 23.8   including:  alcohol, applicators, cotton balls, incontinence 
 23.9   pads, disposable ice bags, dressings, bandages, water pitchers, 
 23.10  tongue depressors, disposable gloves, enemas, enema equipment, 
 23.11  soap, medication cups, diapers, plastic waste bags, sanitary 
 23.12  products, thermometers, hypodermic needles and syringes, and 
 23.13  clinical reagents or similar diagnostic agents, and drugs which 
 23.14  are not paid on a separate fee schedule by the medical 
 23.15  assistance program or any other payer. 
 23.16     Subd. 31.  [NURSING FACILITY.] "Nursing facility" means a 
 23.17  facility with a medical assistance provider agreement that is 
 23.18  licensed under chapter 144A or as a boarding care home under 
 23.19  sections 144.50 to 144.56. 
 23.20     Subd. 32.  [OPERATING COSTS.] "Operating costs" means costs 
 23.21  associated with the direct care costs category and the support 
 23.22  services costs category. 
 23.23     Subd. 33.  [PAYROLL TAXES.] "Payroll taxes" means the 
 23.24  employer's share of the FICA and Medicare withholding tax, and 
 23.25  state and federal unemployment compensation taxes. 
 23.26     Subd. 34.  [PRIOR RATE-SETTING METHOD.] "Prior rate-setting 
 23.27  method" means the rate determination process in effect prior to 
 23.28  October 1, 2005, under Minnesota Rules and Minnesota Statutes. 
 23.29     Subd. 35.  [PRIVATE BED ROOM.] "Private bed room" means a 
 23.30  room with one licensed bed that does not share access to the 
 23.31  corridor with another bed and has a toileting area that is not 
 23.32  shared with another bed. 
 23.33     Subd. 36.  [PRIVATE PAYING RESIDENT.] "Private paying 
 23.34  resident" means a nursing facility resident who is not a medical 
 23.35  assistance recipient and whose payment rate is not established 
 23.36  by another third party, including the veterans administration or 
 24.1   Medicare. 
 24.2      Subd. 37.  [PROPERTY-RELATED COSTS.] "Property-related 
 24.3   costs" means the cost of purchasing buildings, attached 
 24.4   fixtures, and land improvements used directly for resident 
 24.5   care.  The costs of improvements to those assets after the date 
 24.6   of construction are called additional property-related costs. 
 24.7      Subd. 38.  [QUALITY TIERS.] "Quality tiers" means groups of 
 24.8   facilities with quality scores within specified ranges.  Tier 1 
 24.9   shall refer to facilities with scores in the lowest ten percent 
 24.10  of the maximum available quality points, and tier 10 shall refer 
 24.11  to facilities with scores in the highest ten percent of the 
 24.12  maximum available quality points. 
 24.13     Subd. 39.  [RATE YEAR.] "Rate year" means the 12-month 
 24.14  period beginning on October 1 following the second most recent 
 24.15  reporting year. 
 24.16     Subd. 40.  [RELATED ORGANIZATION.] "Related organization" 
 24.17  means a person that furnishes goods or services to a nursing 
 24.18  facility and that is a close relative of a nursing facility, an 
 24.19  affiliate of a nursing facility, a close relative of an 
 24.20  affiliate of a nursing facility, or an affiliate of a close 
 24.21  relative of an affiliate of a nursing facility.  As used in this 
 24.22  subdivision, paragraphs (a) to (d) apply: 
 24.23     (a) "Affiliate" means a person that directly, or indirectly 
 24.24  through one or more intermediaries, controls or is controlled 
 24.25  by, or is under common control with another person. 
 24.26     (b) "Person" means an individual, a corporation, a 
 24.27  partnership, an association, a trust, an unincorporated 
 24.28  organization, or a government or political subdivision. 
 24.29     (c) "Close relative of an affiliate of a nursing facility" 
 24.30  means an individual whose relationship by blood, marriage, or 
 24.31  adoption to an individual who is an affiliate of a nursing 
 24.32  facility is no more remote than first cousin. 
 24.33     (d) "Control" including the terms "controlling," 
 24.34  "controlled by," and "under common control with" means the 
 24.35  possession, direct or indirect, of the power to direct or cause 
 24.36  the direction of the management, operations, or policies of a 
 25.1   person, whether through the ownership of voting securities, by 
 25.2   contract, or otherwise, or to influence in any manner other than 
 25.3   through an arms length, legal transaction. 
 25.4      Subd. 41.  [REPORTING PERIOD.] "Reporting period" means the 
 25.5   one-year period beginning on October 1 and ending on the 
 25.6   following September 30 during which incurred costs are 
 25.7   accumulated and then reported on the statistical and cost report.
 25.8      Subd. 42.  [RESIDENT DAY OR ACTUAL RESIDENT DAY.] "Resident 
 25.9   day" or "actual resident day" means a day for which nursing 
 25.10  services are rendered and billable, or a day for which a bed is 
 25.11  held and billed. 
 25.12     Subd. 43.  [SALARIES AND WAGES.] "Salaries and wages" means 
 25.13  amounts earned by and paid to employees or on behalf of 
 25.14  employees to compensate for necessary services provided.  
 25.15  Salaries and wages include accrued vested vacation and accrued 
 25.16  vested sick leave pay.  Salaries and wages must be paid within 
 25.17  45 days of the end of the reporting period in order to be 
 25.18  allowable costs of the reporting period. 
 25.19     Subd. 44.  [SINGLE BED ROOM.] "Single bed room" means a 
 25.20  room with one licensed bed that does not share access to the 
 25.21  corridor with another bed. 
 25.22     Subd. 45.  [SOCIAL SERVICES COSTS.] "Social services costs" 
 25.23  means costs for the salaries and wages of the supervisor and 
 25.24  other social work employees, associated fringe benefits and 
 25.25  payroll taxes, supplies, services, and consultants. 
 25.26     Subd. 46.  [SPLIT-DOUBLE BED ROOM.] "Split-double bed room" 
 25.27  means a room with two licensed beds that share access to the 
 25.28  corridor where there is a fixed, floor-to-ceiling partition 
 25.29  separating the two beds and each bed has its own window. 
 25.30     Subd. 47.  [STAKEHOLDERS.] "Stakeholders" means individuals 
 25.31  and representatives of organizations interested in long-term 
 25.32  care, including nursing homes, consumers, and labor unions. 
 25.33     Subd. 48.  [STANDARDIZED DAYS.] "Standardized days" means 
 25.34  the sum of resident days by case mix category multiplied by the 
 25.35  RUG index for each category. 
 25.36     Subd. 49.  [STATISTICAL AND COST REPORT.] "Statistical and 
 26.1   cost report" means the forms supplied by the commissioner for 
 26.2   annual reporting of nursing facility expenses and statistics, 
 26.3   including instructions and definitions of items in the report. 
 26.4      Subd. 50.  [SUPPORT SERVICES COSTS CATEGORY.] "Support 
 26.5   services costs category" means costs for dietary, housekeeping, 
 26.6   laundry, maintenance, and administration. 
 26.7      Subd. 51.  [TARGET PRICES.] "Target prices" means the 
 26.8   measures of costs for the direct care cost category and for 
 26.9   support services costs category determined as a statistical 
 26.10  measure of per diem costs for groups of facilities. 
 26.11     Subd. 52.  [UNADJUSTED FACILITY AGE.] "Unadjusted facility 
 26.12  age" means the age of the nursing facility before considering 
 26.13  additional property-related costs. 
 26.14     Subd. 53.  [VALUE OF NEW CONSTRUCTION PUT IN PLACE.] "Value 
 26.15  of New Construction Put in Place" means the statistic published 
 26.16  by the federal Bureau of Labor Statistics. 
 26.17     Subd. 54.  [REPORTING OF STATISTICAL AND COST 
 26.18  INFORMATION.] (a) Beginning January 15, 2005, all nursing 
 26.19  facilities shall provide information annually to the 
 26.20  commissioner on a form and in a manner determined by the 
 26.21  commissioner.  The commissioner may also require nursing 
 26.22  facilities to provide statistical and cost information for a 
 26.23  subset of the items in the annual report on a semiannual basis.  
 26.24  Nursing facilities shall report only costs directly related to 
 26.25  the operation of the nursing facility.  The facility shall not 
 26.26  include costs which are separately reimbursed by residents, 
 26.27  medical assistance, or other payors.  Allocations of costs from 
 26.28  central, affiliated, or corporate office and related 
 26.29  organization transactions shall be reported according to section 
 26.30  256B.432.  The commissioner may grant to facilities one 
 26.31  extension of up to 15 days for the filing of this report if the 
 26.32  extension is requested by December 15 and the commissioner 
 26.33  determines that the extension will not prevent the commissioner 
 26.34  from establishing rates in a timely manner required by law.  The 
 26.35  commissioner may separately require facilities to submit in a 
 26.36  manner specified by the commissioner documentation of 
 27.1   statistical and cost information included in the report to 
 27.2   ensure accuracy in establishing payment rates and to perform 
 27.3   audit and appeal review functions under this section.  
 27.4   Facilities shall retain all records necessary to document 
 27.5   statistical and cost information on the report for a period of 
 27.6   no less than seven years.  The commissioner may amend 
 27.7   information in the report according to subdivision 67.  The 
 27.8   commissioner may reject a report filed by a nursing facility 
 27.9   under this section if the commissioner determines that the 
 27.10  report has been filed in a form that is incomplete or inaccurate 
 27.11  and the information is insufficient to establish accurate 
 27.12  payment rates.  In the event that a report is rejected under 
 27.13  this subdivision or is not submitted in a timely manner, the 
 27.14  commissioner shall reduce the reimbursement rate to a nursing 
 27.15  facility to 85 percent of its most recently established rate 
 27.16  until the information is completely and accurately filed.  The 
 27.17  reinstatement of the total reimbursement rate shall be 
 27.18  retroactive for no more than 90 days. 
 27.19     (b) Nursing facilities may, within 12 months of the due 
 27.20  date of a statistical and cost report, file an amendment when 
 27.21  errors or omissions in the annual statistical and cost report 
 27.22  are discovered and an amendment would result in a rate increase 
 27.23  of at least 20 cents per resident day in a case mix category 
 27.24  with a weight of 1.00 and shall, at any time, file an amendment 
 27.25  which would result in a rate reduction of at least 20 cents per 
 27.26  resident day in a case mix category with a weight of 1.00.  The 
 27.27  commissioner shall make retroactive adjustments to the total 
 27.28  payment rate of a nursing facility if an amendment is accepted.  
 27.29  Where a retroactive adjustment is to be made as a result of an 
 27.30  amended report, audit findings, or other determination of an 
 27.31  incorrect payment rate, the commissioner may settle the payment 
 27.32  error through a negotiated agreement with the facility and a 
 27.33  gross adjustment of the payments to the facility.  Retroactive 
 27.34  adjustments shall not be applied to private pay residents.  An 
 27.35  error or omission for purposes of this item does not include a 
 27.36  nursing facility's determination that an election between 
 28.1   permissible alternatives was not advantageous and should be 
 28.2   changed. 
 28.3      (c) If the commissioner determines that a nursing facility 
 28.4   knowingly supplied inaccurate or false information or failed to 
 28.5   file an amendment to a statistical and cost report that resulted 
 28.6   in or would result in an overpayment, the commissioner shall 
 28.7   immediately adjust the nursing facility's payment rate and 
 28.8   recover the entire overpayment.  The commissioner may also 
 28.9   terminate the commissioner's agreement with the nursing facility 
 28.10  and prosecute under applicable state or federal law. 
 28.11     Subd. 55.  [CALCULATION OF DIRECT CARE PER DIEM COSTS.] The 
 28.12  commissioner shall calculate, for each nursing facility, the 
 28.13  normalized per diem cost for direct care services by dividing 
 28.14  the total allowable reported costs for direct care services by 
 28.15  the number of standardized days for the same reporting period.  
 28.16  The labor portion of this result is divided by the facility's 
 28.17  MSA wage index, and the quotient is added to the nonlabor 
 28.18  portion. 
 28.19     Subd. 56.  [CALCULATION OF SUPPORT SERVICES PER DIEM 
 28.20  COSTS.] The commissioner shall calculate, for each nursing 
 28.21  facility, the per diem cost for support services by dividing the 
 28.22  total allowable reported costs for support services by the 
 28.23  number of resident days for the same reporting period.  The 
 28.24  labor portion of this result is divided by the facility's MSA 
 28.25  wage index, and the quotient is added to the nonlabor portion. 
 28.26     Subd. 57.  [CALCULATION OF A QUALITY SCORE.] The 
 28.27  commissioner shall determine a quality score for each nursing 
 28.28  facility using quality measures established in section 256B.439, 
 28.29  according to methods determined by the commissioner in 
 28.30  consultation with stakeholders and experts.  These methods shall 
 28.31  be exempt from the rulemaking requirements under chapter 14.  
 28.32  For each quality measure, a score shall be determined with a 
 28.33  maximum number of points available and number of points assigned 
 28.34  as determined by the commissioner using the methodology 
 28.35  established according to this subdivision.  The scores 
 28.36  determined for all quality measures shall be totaled.  Ten 
 29.1   quality tiers shall be established in increments of ten percent 
 29.2   of the maximum available points.  Quality scores shall be used 
 29.3   to assign facilities to quality tiers.  The determination of the 
 29.4   quality measures to be used and the methods of calculating 
 29.5   scores may be revised annually by the commissioner.  The 
 29.6   commissioner shall publish the methodology in the State Register 
 29.7   at least 15 months prior to the start of the rate year for which 
 29.8   the revised methodology is effective.  The quality score used to 
 29.9   determine payment rates shall be established for a rate year 
 29.10  using data submitted in the statistical and cost report from the 
 29.11  associated reporting year, and using data from other sources 
 29.12  related to the reporting year. 
 29.13     Subd. 58.  [CALCULATION OF TARGET PRICES.] Annually, the 
 29.14  commissioner shall calculate target prices to be associated with 
 29.15  each quality tier for direct care and for support services costs.
 29.16     (a) The costs calculated in subdivisions 55 and 56 shall be 
 29.17  arranged from lowest to highest.  The commissioner shall include 
 29.18  in the array all facilities that have filed a complete 
 29.19  statistical and cost report within eight weeks of the date 
 29.20  specified under subdivision 54.  Amendments and audit 
 29.21  corrections shall not be incorporated into the costs in the 
 29.22  array. 
 29.23     (b) For each operating cost category, the target price for 
 29.24  the quality tier associated with the facility with the highest 
 29.25  quality score shall be the per diem costs of the facility with 
 29.26  costs of the 70th percentile multiplied by the budget factor in 
 29.27  paragraph (d). 
 29.28     (c) For each operating cost category, the target price for 
 29.29  the quality tier associated with the facility with the lowest 
 29.30  quality score shall be the per diem costs of the facility with 
 29.31  costs at the 30th percentile multiplied by the budget factor in 
 29.32  paragraph (d). 
 29.33     (d) For the rate year beginning on October 1, 2005, the 
 29.34  budget neutrality factor to be used in paragraphs (b) and (c), 
 29.35  shall be a percentage amount that will result in an average per 
 29.36  diem rate $1.03 less than the case mix and MSA normalized 
 30.1   medical assistance average charge per resident day used to 
 30.2   determine the nursing facility forecast published in February 
 30.3   2005 for the 2006 state fiscal year.  The case mix normalized 
 30.4   medical assistance (MA) average charge per resident day shall be 
 30.5   equal to the average MA payment per day, plus the average MA 
 30.6   recipient contribution per day, divided by the average MA RUGs 
 30.7   weight.  The same percentage amount shall be used each year as 
 30.8   in the previous year, except that in the event that the 
 30.9   commissioner publishes a new methodology under subdivision 57, 
 30.10  the commissioner may increase the percentile referenced in 
 30.11  paragraph (b) by as much as five percentile points and shall 
 30.12  reduce the percentile referenced in paragraph (c) by an equal 
 30.13  amount, and a new budget neutrality factor shall be determined.  
 30.14  This new budget neutrality factor shall be the percentage amount 
 30.15  that will result in an average per diem rate equal to the 
 30.16  average per diem used to determine the most recently published 
 30.17  nursing facility forecast.  In no event shall the percentile 
 30.18  amount in paragraph (b) exceed the 90th percentile.  The same 
 30.19  budget neutrality factor shall be used for all three groups of 
 30.20  facilities in paragraph (f). 
 30.21     (e) The target prices for the remaining quality tiers shall 
 30.22  be calculated by using a straight line interpolation from the 
 30.23  target prices determined in paragraphs (b) and (c). 
 30.24     (f) The calculations in paragraphs (a) to (c) and (e) shall 
 30.25  be performed separately for three groups of facilities in 
 30.26  clauses (1) to (3) to establish different target prices for each 
 30.27  group for direct care costs: 
 30.28     (1) facilities that have three or more admissions per bed 
 30.29  per year, are hospital attached, or are licensed under Minnesota 
 30.30  Rules, parts 9570.2000 to 9570.3600; 
 30.31     (2) facilities that have more than 50 percent of their beds 
 30.32  licensed as boarding care homes; and 
 30.33     (3) all other facilities. 
 30.34     (g) For facilities with both nursing home and boarding care 
 30.35  home licensed beds, the target price shall be the average of the 
 30.36  target prices under paragraph (f), clause (1), (2), or (3), 
 31.1   weighted for the number of beds of each type. 
 31.2      Subd. 59.  [CALCULATION OF UNINFLATED PAYMENT RATES FOR 
 31.3   OPERATING COSTS.] The commissioner shall determine the 
 31.4   uninflated payment rates for direct care costs and for support 
 31.5   services costs for each facility according to paragraphs (a) to 
 31.6   (j). 
 31.7      (a) For direct care costs, determine the lesser of the 
 31.8   target price for the quality tier assigned to the facility or 
 31.9   the per diem costs in subdivision 55. 
 31.10     (b) Determine the difference between the two amounts in 
 31.11  paragraph (a). 
 31.12     (c) For direct care costs, for facilities with costs 
 31.13  greater than the target price, determine the portion of the 
 31.14  difference determined in paragraph (b) to be included in the 
 31.15  payment rate with this table: 
 31.16  For       The rate shall include this portion 
 31.17  Quality   of differences of:
 31.18  Tier  $0-5  5.01-10  10.01-15  15.01-20  20.01-25  25.01-35
 31.19  1        0%      0%       0%       0%        0%       0%
 31.20  2        0%      0%       0%       0%        0%       0%
 31.21  3       20%      0%       0%       0%        0%       0%
 31.22  4       40%     20%       0%       0%        0%       0%
 31.23  5       70%     50%      20%       0%        0%       0%
 31.24  6      100%     70%      40%      20%        0%       0%
 31.25  7      105%     70%      50%      30%       10%       0%
 31.26  8      110%     90%      70%      50%       30%      10%
 31.27  9      110%    100%      90%      60%       40%      20%
 31.28  10     120%    100%     100%      80%       50%      30%
 31.29     (d) For direct care costs, for facilities with costs less 
 31.30  than the target price, determine the portion of the difference 
 31.31  determined in paragraph (b) to be included in the payment rate 
 31.32  with this table: 
 31.33  For        The rate shall include this portion
 31.34  Quality    of differences of:
 31.35  Tier           $0-5     5.01-10      >$10
 31.36  1               10%          0%        0%
 32.1   2               10%          0%        0%
 32.2   3               20%         10%        0%
 32.3   4               30%         15%        0%
 32.4   5               50%         25%        0%
 32.5   6               50%         25%        0%
 32.6   7               60%         30%        0%
 32.7   8               80%         40%        0%
 32.8   9               90%         45%        0%
 32.9   10             100%         50%        0%
 32.10     (e) The payment rate for direct care costs shall be the 
 32.11  amount determined in paragraph (a) plus the amount determined in 
 32.12  either paragraph (c) or (d). 
 32.13     (f) For support services costs, determine the lesser of the 
 32.14  target price for the quality tier assigned to the facility or 
 32.15  the per diem costs in subdivision 56. 
 32.16     (g) Determine the difference between the two amounts in 
 32.17  paragraph (f). 
 32.18     (h) For support services costs, for facilities with costs 
 32.19  greater than the target price, determine the portion of the 
 32.20  difference determined in paragraph (g) to be included in the 
 32.21  payment rate with this table: 
 32.22  For       The rate shall include this portion
 32.23  Quality   of differences of:
 32.24  Tier       $0-2   2.01-4   4.01-6   6.01-8   8.01-10  >$10
 32.25  1            0%      0%       0%       0%       0%      0%
 32.26  2            0%      0%       0%       0%       0%      0%
 32.27  3           20%      0%       0%       0%       0%      0%
 32.28  4           40%     20%       0%       0%       0%      0%
 32.29  5           70%     50%      20%       0%       0%      0%
 32.30  6          100%     70%      40%      20%       0%      0%
 32.31  7          105%     70%      50%      30%      10%      0%
 32.32  8          110%     90%      70%      50%      30%     10%
 32.33  9          110%    100%      90%      60%      40%     20%
 32.34  10         120%    100%     100%      80%      50%     30%
 32.35     (i) For support services costs, for facilities with costs 
 32.36  less than the target price, determine the portion of the 
 33.1   difference determined in paragraph (g) to be included in the 
 33.2   payment rate with this table: 
 33.3   For        The rate shall include this portion
 33.4   Quality    of differences of:
 33.5   Tier         $0-2          2.01-4        >$4
 33.6   1             10%             0%          0%
 33.7   2             10%             0%          0%
 33.8   3             20%            10%          0%
 33.9   4             30%            15%          0%
 33.10  5             50%            25%          0%
 33.11  6             50%            25%          0%
 33.12  7             60%            30%          0%
 33.13  8             80%            40%          0%
 33.14  9             90%            45%          0%
 33.15  10           100%            50%          0%
 33.16     (j) The payment rate for support services costs shall be 
 33.17  the amount determined in paragraph (f) plus the amount 
 33.18  determined in either paragraph (h) or (i). 
 33.19     Subd. 60.  [GEOGRAPHIC ADJUSTMENTS.] The commissioner shall 
 33.20  determine the labor-related share of the operating rate in 
 33.21  accordance with the labor-related share statistics published by 
 33.22  the Center for Medicare and Medicaid Services in the Federal 
 33.23  Register effective on the October 1 prior to the start of the 
 33.24  year for which rates are established.  The commissioner shall 
 33.25  multiply the labor-related share of the operating rate by the 
 33.26  wage index published by the Center for Medicare and Medicaid 
 33.27  Services in the Federal Register effective on the October 1 
 33.28  prior to the start of the year for which rates are established. 
 33.29     Subd. 61.  [ADJUSTER FOR OPERATING PAYMENT RATES.] The 
 33.30  commissioner shall provide information to the appropriate 
 33.31  committee chairs of the legislature by January 15 of 
 33.32  odd-numbered years specifying adjusters that may be multiplied 
 33.33  by the uninflated payment rates, by the target prices, or by any 
 33.34  other factor the commissioner deems appropriate, for case mix 
 33.35  adjusted and support care service costs determined in 
 33.36  subdivision 59.  The information shall include: 
 34.1      (1) projected change in the CPI-U, between the midpoint of 
 34.2   the reporting years and the midpoint of the rate years, as 
 34.3   determined by the national economic consultant used by the 
 34.4   commissioner of finance, for the years in the next biennium; 
 34.5      (2) the costs or savings to the state of using any factor 
 34.6   other than 100 percent; and 
 34.7      (3) the commissioner may also describe other factors that 
 34.8   the commissioner recommends for establishing the adjuster. 
 34.9      Subd. 62.  [CALCULATION OF PAYMENT RATE FOR EXTERNAL FIXED 
 34.10  COSTS.] The commissioner shall calculate a payment rate for 
 34.11  external fixed costs. 
 34.12     (a) For facilities licensed as nursing homes, the portion 
 34.13  related to section 256.9657 shall be equal to $8.86.  For 
 34.14  facilities licensed as both nursing homes and boarding care 
 34.15  homes, the portion related to section 256.9657 shall be equal to 
 34.16  $8.86 multiplied by the ratio of their number of nursing home 
 34.17  beds divided by their total number of licensed beds. 
 34.18     (b) The portion related to the licensure fee under section 
 34.19  144.122, paragraph (d), shall be the amount of the fee divided 
 34.20  by actual resident days. 
 34.21     (c) The portion related to scholarships shall be determined 
 34.22  under section 256B.431, subdivision 36. 
 34.23     (d) The portion related to long-term care consultation 
 34.24  shall be determined according to section 256B.0911, subdivision 
 34.25  6. 
 34.26     (e) The portion related to development and education of 
 34.27  resident and family advisory councils under section 144A.33 
 34.28  shall be $5 divided by 365. 
 34.29     (f) The portion related to planned closure rate adjustments 
 34.30  shall be as determined under section 256B.437, subdivision 6. 
 34.31     (g) The portions related to property insurance, real estate 
 34.32  taxes, special assessments, and payments made in lieu of real 
 34.33  estate taxes directly identified or allocated to the nursing 
 34.34  facility shall be the actual amounts divided by actual resident 
 34.35  days. 
 34.36     (h) The portion related to the provision of movable 
 35.1   equipment shall be an equipment allowance.  Each facility shall 
 35.2   report the cumulative purchase price of all movable equipment in 
 35.3   active use in the facility.  This amount shall be divided by the 
 35.4   product of ten, 365, and the number of licensed beds not in 
 35.5   layaway in the facility on the last day of the reporting 
 35.6   period.  These values shall be arrayed and the median 
 35.7   determined.  The equipment allowance shall be this value 
 35.8   multiplied by the property budget neutrality factor determined 
 35.9   in subdivision 63, paragraph (g), clause (6). 
 35.10     (i) The portion related to PERA shall be actual costs 
 35.11  divided by resident days. 
 35.12     (j) The payment rate for external fixed costs shall be the 
 35.13  sum of the amounts in paragraphs (a) to (i). 
 35.14     Subd. 63.  [CALCULATION OF PAYMENT RATE FOR 
 35.15  PROPERTY-RELATED COSTS.] The commissioner shall calculate a 
 35.16  payment rate for property-related costs according to paragraphs 
 35.17  (a) to (h). 
 35.18     (a) Determine common rental value per bed.  The 
 35.19  commissioner shall determine a common rental value that will be 
 35.20  used by all facilities.  The common rental value for the rate 
 35.21  year beginning on October 1, 2005, will be computed based upon 
 35.22  the replacement cost new per bed limit in effect at the end of 
 35.23  the reporting year for multiple-bed rooms as found in section 
 35.24  256B.431, subdivision 17, paragraph (g).  In subsequent rate 
 35.25  years, the multiple-bed replacement cost new limit will be 
 35.26  adjusted annually by the percentage change in the Bureau of the 
 35.27  Census:  Composite fixed-weighted price index as published in 
 35.28  the C30 Report, Value of New Construction Put in Place. 
 35.29     The equipment allowance determined under subdivision 62, 
 35.30  paragraph (h), shall be multiplied by 365 and by ten.  This 
 35.31  amount shall be deducted from the multiple-bed replacement cost 
 35.32  new limit to determine the common rental value.  
 35.33     (b) Compute each facility's specific rental value per bed.  
 35.34  Each nursing facility's specific rental value shall equal the 
 35.35  common rental value multiplied by its space adjuster, location 
 35.36  adjuster, split-double bed room adjuster, and age adjuster as 
 36.1   described in paragraphs (c), (d), (e), and (f). 
 36.2      (c) Space adjuster.  Each nursing facility shall have a 
 36.3   space adjuster computed that will be used to convert the common 
 36.4   rental value to its facility specific rental value.  A 
 36.5   facility's square footage of space used for the operation of the 
 36.6   nursing facility shall be divided by the number of its active 
 36.7   beds.  Each of these values shall be arrayed from lowest to 
 36.8   highest and the median value determined.  The space adjuster is 
 36.9   one-fourth of the sum of the number three plus the quotient of 
 36.10  the facility's square footage per active bed divided by the 
 36.11  median square footage per active bed.  The minimum adjuster 
 36.12  shall be 0.85 and the maximum adjuster shall be 1.15. 
 36.13     (d) Location adjuster.  Each nursing facility shall have a 
 36.14  location adjuster assigned that will be used to convert the 
 36.15  common rental value to its facility specific rental value.  The 
 36.16  location adjuster shall be the value published by RS Means and 
 36.17  assigned to each Metropolitan Statistical Area (MSA) published 
 36.18  by CMS and used for the Medicare prospective payment system for 
 36.19  skilled nursing facilities.  The RS Means location factor is 
 36.20  assigned to each MSA as follows: 
 36.21   MSA Region  RS Means           Applies to the counties of
 36.22               Location Adjuster
 36.23   2240        1.033              St. Louis
 36.24   2520        0.983              Clay
 36.25   2985        0.940              Polk, Red Lake
 36.26   3870        1.021              Houston
 36.27   5120        1.124              Anoka, Carver, Chisago,
 36.28                                  Dakota, Hennepin, Isanti,
 36.29                                  Ramsey, Scott, Sherburne,
 36.30                                  Washington, Wright
 36.31   6820        1.021              Olmsted
 36.32   6980        1.054              Benton, Stearns
 36.33   Rural       0.960              All other counties not
 36.34                                  listed above
 36.35     (e) Split-double bed room adjuster.  Each nursing facility 
 36.36  shall have a split-double bed room adjuster computed that will 
 37.1   be used to convert the common rental value to its facility 
 37.2   specific rental value.  The amount for a facility shall be the 
 37.3   number one plus the quotient of the number of active beds in 
 37.4   split-double bed rooms divided by four times the number of total 
 37.5   active beds. 
 37.6      (f) Age adjuster.  Each nursing facility shall have an age 
 37.7   adjuster computed that will be used to convert the common rental 
 37.8   value to its facility specific rental value.  A facility's age 
 37.9   shall be the number of days between the date of completion of 
 37.10  construction and the beginning of the rate year divided by 
 37.11  365.25 rounded to the nearest tenth. 
 37.12     (1) For facilities that have been sold since completion of 
 37.13  construction, if the licensee reports that the date of 
 37.14  completion of construction is unknown, and the commissioner 
 37.15  agrees the date is unknown, the most recent purchase date of the 
 37.16  facility shall be used to determine the presumed age as follows: 
 37.17     (i) the purchase price of the facility will be reduced by 
 37.18  20 percent to account for movable equipment, technology, and the 
 37.19  business operations; 
 37.20     (ii) the adjusted purchase price in item (i) shall be 
 37.21  divided by the number of active beds; 
 37.22     (iii) the common rental value computed in paragraph (a) 
 37.23  will be indexed backward from the beginning of the rate year to 
 37.24  the date of the facility's purchase using the indices described 
 37.25  in paragraph (a); 
 37.26     (iv) multiply the facility's location adjuster in paragraph 
 37.27  (d) by its space adjuster in paragraph (c); 
 37.28     (v) the adjusted purchase price per active bed in item (ii) 
 37.29  shall be divided by the product of the location adjuster and 
 37.30  space adjuster in item (iv); 
 37.31     (vi) divide the value in item (v) by the indexed common 
 37.32  rental value in item (iii); 
 37.33     (vii) the value in item (vi) is subtracted from 1.0; 
 37.34     (viii) the age at the time of purchase shall be the value 
 37.35  in item (vii) divided by 0.015; and 
 37.36     (ix) the age as of the beginning of the rate year shall be 
 38.1   the value computed in item (viii) plus the quotient of the 
 38.2   number of days between the date of purchase and the start of the 
 38.3   rate year divided by 365.25. 
 38.4      (2) For facilities that are used by the current licensee, 
 38.5   under an operating leasee according to generally accepted 
 38.6   accounting principles, and for which the licensee reports that 
 38.7   the date of completion of construction is unknown and that the 
 38.8   most recent date and price of sale is also unknown, and the 
 38.9   commissioner agrees that these facts are unknown, the presumed 
 38.10  age shall be computed as follows: 
 38.11     (i) compute the present value of the minimum lease payments 
 38.12  according to generally accepted accounting principles using an 
 38.13  interest rate equal to the ten-year United States Treasury Bond 
 38.14  rate plus two percent and a term of 20 years; 
 38.15     (ii) the present value in item (i) shall be reduced by ten 
 38.16  percent to account for movable equipment and technology; 
 38.17     (iii) the adjusted present value in item (ii) shall be 
 38.18  divided by the number of active beds; 
 38.19     (iv) the common rental value computed in paragraph (a) will 
 38.20  be indexed backward from the beginning of the rate year to the 
 38.21  date of the facility's lease using the indices described in 
 38.22  paragraph (a); 
 38.23     (v) multiply the facility's location adjuster by its space 
 38.24  adjuster; 
 38.25     (vi) the adjusted present value per active bed in item (iii)
 38.26  shall be divided by the product of the location adjuster and 
 38.27  space adjuster in item (v); 
 38.28     (vii) divide the value in item (vi) by the indexed common 
 38.29  rental value in item (iv); 
 38.30     (viii) the value in item (vii) is subtracted from 1.0; 
 38.31     (ix) the age at the time of the inception of the lease 
 38.32  shall be the value in item (viii) divided by 0.015; and 
 38.33     (x) the age as of the beginning of the rate year shall be 
 38.34  the value computed in item (ix) plus the quotient of the number 
 38.35  of days between the date of lease inception and the start of the 
 38.36  rate year divided by 365.25. 
 39.1      (3) For the rate year beginning on October 1, 2005, the age 
 39.2   of the facility shall be adjusted for the value of 
 39.3   property-related costs added since the date of construction, 
 39.4   purchase, or lease to determine the effective age.  The 
 39.5   additions allowed in this calculation will be those recognized 
 39.6   as improvements, and not as repairs, under generally accepted 
 39.7   accounting principles.  The effective age shall be computed as 
 39.8   follows: 
 39.9      (i) the depreciated portion of the facility shall be 
 39.10  computed as the common rental value multiplied by the facility's 
 39.11  space adjuster, location adjuster, split-double bed room 
 39.12  adjuster, and the product of the unadjusted facility age 
 39.13  computed in this paragraph and 0.015; 
 39.14     (ii) the allowable additional property-related costs that 
 39.15  were purchased between the date of construction, purchase, or 
 39.16  lease and October 1, 2005, shall be the costs divided by two; 
 39.17     (iii) the allowable additions are divided by the value in 
 39.18  item (i) and rounded to the nearest whole number; 
 39.19     (iv) the number of active beds are reduced by the value in 
 39.20  item (iii).  If this results in a value that is less than zero, 
 39.21  use zero; 
 39.22     (v) the value in item (iv) is multiplied by the unadjusted 
 39.23  facility age; and 
 39.24     (vi) the effective age is the value in item (v) divided by 
 39.25  the number of active beds. 
 39.26     (4) For years beginning on or after October 1, 2006, the 
 39.27  facility's age can be adjusted for additional property-related 
 39.28  costs incurred during the rate year using the method for the 
 39.29  rate year beginning on October 1, 2005, in clause (3), items (i) 
 39.30  to (vi).  If a facility's age has been adjusted in a prior rate 
 39.31  year, the unadjusted facility age referred to in clause (3), 
 39.32  item (i), is the age produced by clause (3), items (i) to (vi), 
 39.33  in the prior rate year.  The allowable additions in clause (3), 
 39.34  item (ii), are the property-related costs incurred during the 
 39.35  reporting year. 
 39.36     The age adjuster shall be the number one minus the product 
 40.1   of the effective age and 0.015.  The age adjuster cannot be less 
 40.2   than 0.4. 
 40.3      (g) Compute the property-related rate.  The 
 40.4   property-related payment rate for a facility is computed as: 
 40.5      (1) an interest rate shall be computed that is the mean of 
 40.6   the United States Treasury Bond Ten-Year Rates for the most 
 40.7   recent 12 quarters ending with the July 1 date immediately 
 40.8   preceding the beginning of the rate year.  The rates to be used 
 40.9   are those published on the first business day of each quarter; 
 40.10     (2) the amount in clause (1) shall be increased by two 
 40.11  percent; 
 40.12     (3) a facility's specific rental value shall be multiplied 
 40.13  by the value in clause (2); 
 40.14     (4) a divisor for all facilities will be 365 multiplied by 
 40.15  0.95; 
 40.16     (5) the value in clause (3) divided by the value in clause 
 40.17  (4); and 
 40.18     (6) the property-related rate shall be the value in clause 
 40.19  (5) multiplied by a property budget neutrality factor.  The 
 40.20  budget neutrality factor equals the median property payment rate 
 40.21  under the prior setting method for October 1, 2005, divided by 
 40.22  the median of the values in clause (5) plus the equipment 
 40.23  allowance in subdivision 62, paragraph (h), for October 1, 2005. 
 40.24  This budget neutrality factor shall be used in subsequent years. 
 40.25     (h) Private bed room and single bed room payment adjustment.
 40.26  The commissioner shall allow a private bed room payment rate by 
 40.27  increasing the property-related rate computed in paragraph (g) 
 40.28  by 1.65 for a medical assistance recipient in a private bed 
 40.29  room.  The commissioner shall allow a single bed room payment 
 40.30  rate by increasing the property-related rate computed in 
 40.31  paragraph (g) by 1.35 for a medical assistance recipient in a 
 40.32  single bed room.  Rates charged to private-paying residents in 
 40.33  private bed or single bed rooms are not limited. 
 40.34     (i) Additions to property-related costs during the phase-in 
 40.35  period.  If a facility makes additions to property-related costs 
 40.36  during the period October 1, 2005, to September 30, 2007, the 
 41.1   commissioner will compute the change to the property-related 
 41.2   rate as described in paragraph (f).  Notwithstanding the 
 41.3   requirements of the rate-setting method for property-related 
 41.4   costs in Minnesota Rules and Minnesota Statutes, the amount of 
 41.5   the rate change computed in paragraph (f) shall be recognized as 
 41.6   an additional rate change under the prior rate-setting method 
 41.7   for the calculation of rates in subdivision 65, paragraph (c). 
 41.8      Subd. 64.  [CALCULATION OF TOTAL PAYMENT RATE.] The 
 41.9   commissioner shall calculate the total payment rate by adding 
 41.10  together the payment rates determined in subdivisions 61, 62, 
 41.11  and 63. 
 41.12     Subd. 65.  [PHASE-IN.] The commissioner shall implement the 
 41.13  rate-setting methods in this section according to paragraphs (a) 
 41.14  to (j). 
 41.15     (a) Rates effective on June 30, 2005, shall remain in 
 41.16  effect through September 30, 2005. 
 41.17     (b) By August 15 of 2005, 2006, and 2007, the commissioner 
 41.18  shall notify nursing facilities of the rates they will receive 
 41.19  under both this section and under the prior rate-setting method, 
 41.20  and of the actual rates that will apply based on a blending of 
 41.21  these two rate sets. 
 41.22     (c) For purposes of determining payment rates under the 
 41.23  prior rate-setting method, for rate years beginning after June 
 41.24  30, 2005, the rate adjustment under section 256B.434, 
 41.25  subdivision 4, paragraph (c), shall apply only to the 
 41.26  property-related payment rate, and this method shall be used for 
 41.27  computing property payment rates under the prior rate-setting 
 41.28  method for all facilities. 
 41.29     (d) For rate years beginning October 1 of 2005, 2006, and 
 41.30  2007, for operating payment rate components under the prior 
 41.31  rate-setting method, the commissioner shall use the amounts in 
 41.32  effect on June 30, 2005. 
 41.33     (e) Notwithstanding the requirements of the prior 
 41.34  rate-setting method, facilities with property-related rates 
 41.35  computed under Minnesota Rules, parts 9549.0010 to 9549.0080 for 
 41.36  the rate year beginning on July 1, 2004, will have the equity 
 42.1   incentive under section 256B.431, subdivision 16, the 
 42.2   refinancing incentive under section 256B.431, subdivision 19, 
 42.3   and the capital repairs and replacements rate under section 
 42.4   256B.431, subdivision 15, held constant until September 30, 2008.
 42.5      (f) For the determination of the rate under the prior 
 42.6   rate-setting method, the real estate and special assessments 
 42.7   payment rate will be computed as described under sections 
 42.8   256B.431, subdivision 2b, paragraph (g), and 256B.0911, 
 42.9   subdivision 6. 
 42.10     (g) The actual total payment rate that will apply on 
 42.11  October 1, 2005, shall consist of ten percent of the amount 
 42.12  determined under this section and 90 percent of the amount 
 42.13  determined under the prior rate-setting method. 
 42.14     (h) The actual total payment rate that will apply on 
 42.15  October 1, 2006, shall consist of 40 percent of the amount 
 42.16  determined under this section and 60 percent of the amount 
 42.17  determined under the prior rate-setting method. 
 42.18     (i) The actual total payment rate that will apply on 
 42.19  October 1, 2007, shall consist of 70 percent of the amount 
 42.20  determined under this section and 30 percent of the amount 
 42.21  determined under the prior rate-setting method. 
 42.22     (j) The actual total payment rate that will apply on 
 42.23  October 1, 2008, shall be the amount determined under this 
 42.24  section. 
 42.25     (k) The additional payment for a private bed room or a 
 42.26  single bed room allowed in subdivision 63, paragraph (h), shall 
 42.27  be added to the amounts determined under this section and the 
 42.28  prior rate-setting method. 
 42.29     Subd. 66.  [EXCEPTION ALLOWING CONTRACTING FOR SPECIALIZED 
 42.30  CARE.] (a) The commissioner shall publish a request for 
 42.31  proposals annually, and may negotiate operating payment rates 
 42.32  with up to 2.5 percent of nursing facilities, that provide 
 42.33  specialized care.  Rate negotiations must be based on costs.  In 
 42.34  selecting facilities to negotiate with, the commissioner shall 
 42.35  consider the following criteria: 
 42.36     (1) the facility should have a high quality score; 
 43.1      (2) the facility should have high direct care per diem 
 43.2   costs; 
 43.3      (3) the facility must serve residents with diagnoses or 
 43.4   other circumstances that require care costing more than normal 
 43.5   in a nursing home setting; and 
 43.6      (4) the facility must provide a specialized program or 
 43.7   programs to meet the needs of these individuals and serve a 
 43.8   large portion of the individuals residing in the facility. 
 43.9      (b) Negotiated rate adjustments shall not exceed 50 percent 
 43.10  of the direct care portion of the payment rate associated with 
 43.11  the RUGs group with the highest index, that would otherwise be 
 43.12  established under this section.  Negotiated rates shall apply to 
 43.13  the entire facility.  The commissioner may negotiate rates that 
 43.14  will apply for either one or two years.  Facilities with 
 43.15  negotiated rates under this subdivision shall not be included in 
 43.16  determining target prices under subdivision 58. 
 43.17     Subd. 67.  [AUDIT AUTHORITY.] (a) The commissioner may 
 43.18  subject reports and supporting documentation to desk and field 
 43.19  audits to determine compliance with this section.  Retroactive 
 43.20  adjustments shall be made as a result of desk or field audit 
 43.21  findings if the cumulative impact of the finding would result in 
 43.22  a rate adjustment of at least 20 cents per resident day in a 
 43.23  case mix category with a weight of 1.00.  If a field audit 
 43.24  reveals inadequacies in a nursing facility's record keeping or 
 43.25  accounting practices, the commissioner may require the nursing 
 43.26  facility to engage competent professional assistance to correct 
 43.27  those inadequacies within 90 days so that the field audit may 
 43.28  proceed. 
 43.29     (b) Field audits may cover the four most recent annual 
 43.30  statistical and cost reports for which desk audits have been 
 43.31  completed and payment rates have been established.  The field 
 43.32  audit must be an independent review of the nursing facility's 
 43.33  statistical and cost report.  All transactions, invoices, or 
 43.34  other documentation that support or relate to the statistics and 
 43.35  costs claimed on the annual statistical and cost reports are 
 43.36  subject to review by the field auditor.  If the provider fails 
 44.1   to provide the field auditor access to supporting documentation 
 44.2   related to the information reported on the statistical and cost 
 44.3   report within the time period specified by the commissioner, the 
 44.4   commissioner shall either calculate the total payment rate by 
 44.5   disallowing the cost of the items for which access to the 
 44.6   supporting documentation is not provided or applying the 
 44.7   provider's reimbursement rate reduction in subdivision 54, 
 44.8   whichever would result in the least amount of change in the 
 44.9   total payment rate. 
 44.10     (c) Changes in the total payment rate which result from 
 44.11  desk or field audit adjustments to statistical and cost reports 
 44.12  for reporting years earlier than the four most recent annual 
 44.13  cost reports must be made to the four most recent annual 
 44.14  statistical and cost reports, the current statistical and cost 
 44.15  report, and future statistical and cost reports to the extent 
 44.16  that those adjustments affect the total payment rate established 
 44.17  by those reporting years. 
 44.18     (d) The commissioner shall extend the period for retention 
 44.19  of records under subdivision 54 for purposes of performing field 
 44.20  audits as necessary to enforce section 256B.48 with written 
 44.21  notice to the facility postmarked no later than 90 days prior to 
 44.22  the expiration of the record retention requirement. 
 44.23     Subd. 68.  [REMEDIES FOR DISPUTES.] The commissioner shall 
 44.24  provide remedies for disputes under this section. 
 44.25     (a) A provider may appeal a determination of a payment rate 
 44.26  established under this section if the appeal, if successful, 
 44.27  would result in a change to the provider's payment rate.  
 44.28  Appeals must be filed according to procedures in this 
 44.29  subdivision. 
 44.30     (b) To appeal, the provider shall file with the 
 44.31  commissioner a written notice of appeal and the appeal must be 
 44.32  postmarked or received by the commissioner within 60 days of the 
 44.33  date the determination of the payment rate was mailed or 
 44.34  personally received by a provider, whichever is earlier. 
 44.35     (c) The notice of appeal must specify: 
 44.36     (1) each disputed item; 
 45.1      (2) the reason for the dispute; 
 45.2      (3) the computation that the provider believes is correct; 
 45.3      (4) the authority in statute or rule upon which the 
 45.4   provider relies for each disputed item; 
 45.5      (5) the name and address of the person or firm with whom 
 45.6   contacts may be made regarding the appeal; and 
 45.7      (6) additional information the provider wishes to offer 
 45.8   with the appeal to support the provider's position.  The 
 45.9   commissioner may request additional information to clarify the 
 45.10  provider's position. 
 45.11     (d) The commissioner shall review appeals and issue a 
 45.12  written appeal determination on each appealed item within 180 
 45.13  days of the due date of the appeal.  Upon mutual agreement, the 
 45.14  commissioner and the provider may extend the time for issuing a 
 45.15  determination for a specified period.  The appeal determination 
 45.16  takes effect 30 days following the date of issuance specified in 
 45.17  the determination. 
 45.18     (e) For an appeal item on which the provider disagrees with 
 45.19  the appeal determination, the provider may request 
 45.20  reconsideration.  A request for reconsideration must be 
 45.21  postmarked or received by the commissioner within 30 days of the 
 45.22  date of issuance of the determination.  A request for 
 45.23  reconsideration delays the date on which the determination takes 
 45.24  effect.  The appeal determination and any changes resulting from 
 45.25  reconsideration will become effective 30 days following the 
 45.26  issuance of the reconsideration response. 
 45.27     (f) For an appeal item on which the provider disagrees with 
 45.28  the appeal determination and the reconsideration response, if 
 45.29  any, the provider may file with the commissioner a written 
 45.30  demand for a contested case hearing to determine the proper 
 45.31  resolution of specified appeal items.  The demand must be 
 45.32  postmarked or received by the commissioner within 30 days of the 
 45.33  date of issuance specified in the determination or within 30 
 45.34  days of the issuance of the reconsideration response, if 
 45.35  reconsideration was requested.  A demand for a contested case 
 45.36  hearing for an appeal item nullifies the written appeal 
 46.1   determination issued by the commissioner for that appeal item.  
 46.2   The commissioner shall refer any demand for a contested case 
 46.3   hearing to the Office of the Attorney General. 
 46.4      (g) A contested case hearing shall be heard by an 
 46.5   administrative law judge according to sections 14.48 to 14.56.  
 46.6   In any proceeding under this section, the appealing party must 
 46.7   demonstrate by a preponderance of the evidence that the 
 46.8   determination of a payment rate is incorrect. 
 46.9      (h) Regardless of any rate appeal, the rate established 
 46.10  must be the rate paid and must remain in effect until final 
 46.11  resolution of the appeal or a subsequent rate determination. 
 46.12     (i) A provider shall not use this process to challenge the 
 46.13  method of determining a quality score under subdivision 57; the 
 46.14  calculation of target prices under subdivision 58; the 
 46.15  application of an adjuster determined according to subdivision 
 46.16  61; the determination of the weighted median square feet per bed 
 46.17  under subdivision 63; or the commissioner's determination under 
 46.18  subdivision 66 or 69 to negotiate rates.  This process does not 
 46.19  apply to a request from a resident or nursing facility for 
 46.20  reconsideration of the classification of a resident under 
 46.21  section 144.0722 or 144.0724. 
 46.22     (j) Target prices must not be recalculated to reflect 
 46.23  changes to cost or statistical data resulting from an appeal 
 46.24  resolution. 
 46.25     Subd. 69.  [INTERIM RATES.] (a) The commissioner shall 
 46.26  determine interim payment rates for nursing facilities that have 
 46.27  no cost history.  The facilities shall provide statistical and 
 46.28  cost information, according to subdivision 54, on a prospective 
 46.29  basis.  The commissioner shall establish an interim rate using 
 46.30  the quality tier of the nursing facility with a quality score at 
 46.31  the 60th percentile, costs according to a budget negotiated with 
 46.32  the provider, and the methods provided in subdivisions 59, 62, 
 46.33  and 63.  The interim rate shall apply until a rate can be 
 46.34  established under this section.  Upon providing final 
 46.35  information under subdivision 54 for the interim rate period, 
 46.36  the commissioner shall determine that an overpayment has 
 47.1   occurred if per diem costs for total operating cost categories 
 47.2   were less than budgeted by an amount greater than four percent, 
 47.3   and shall recover any overpayment subject to the following 
 47.4   limitations: 
 47.5      (1) based upon the actual quality score, the commissioner 
 47.6   shall adjust the quality tier to be used, but may not reduce the 
 47.7   quality tier by more than one level; 
 47.8      (2) in establishing the final rate for the interim period, 
 47.9   the commissioner shall use target prices as provided under 
 47.10  subdivision 58; and 
 47.11     (3) in the event of an overpayment, the commissioner may 
 47.12  allow up to six months for complete repayment if the provider 
 47.13  demonstrates that immediate repayment of the overpayment would 
 47.14  result in an undue hardship to the operation of the facility. 
 47.15     (b) The commissioner may negotiate an interim rate with a 
 47.16  nursing facility, according to the process in paragraph (a), 
 47.17  when that facility has been purchased by an unrelated party 
 47.18  within the last six months.  In determining if negotiations 
 47.19  shall be initiated, the commissioner shall consider: 
 47.20     (1) the potential inadequacy of current rates as evidenced 
 47.21  by the position in the arrays of operating costs of the rates of 
 47.22  the requesting facility; 
 47.23     (2) preventing closure of facilities in under-bedded areas 
 47.24  of the state, as measured by the number of beds per 1,000 
 47.25  elderly in the county or in contiguous counties in which the 
 47.26  facility is located; 
 47.27     (3) the ability of the purchaser to provide high quality 
 47.28  services as evidenced by high quality scores of any other 
 47.29  facility under the control of the purchaser operating in 
 47.30  Minnesota; 
 47.31     (4) the ability of the purchasing entity to operate 
 47.32  efficiently as evidenced by the difference between the operating 
 47.33  costs and target prices of the other facility or facilities 
 47.34  under the control of the purchaser operating in Minnesota; 
 47.35     (5) previous success of the purchaser with negotiated 
 47.36  interim rates; 
 48.1      (6) the financial soundness of the purchaser; 
 48.2      (7) avoiding negotiating interim rates with purchasers who 
 48.3   have sold facilities that then requested interim rate 
 48.4   negotiation; and 
 48.5      (8) avoiding too much consolidation of the nursing facility 
 48.6   industry within any small number of providers. 
 48.7      Sec. 16.  Minnesota Statutes 2003 Supplement, section 
 48.8   256B.47, subdivision 2, is amended to read: 
 48.9      Subd. 2.  [NOTICE TO RESIDENTS.] (a) No increase in nursing 
 48.10  facility rates for private paying residents shall be effective 
 48.11  unless the nursing facility notifies the resident or person 
 48.12  responsible for payment of the increase in writing 30 days 
 48.13  before the increase takes effect.  
 48.14     A nursing facility may adjust its rates without giving the 
 48.15  notice required by this subdivision when the purpose of the rate 
 48.16  adjustment is to reflect a change in the case-mix classification 
 48.17  of the resident.  If the state fails to set rates as required by 
 48.18  section ~~256B.431~~ 256B.440, ~~subdivision 1,~~ the time required for 
 48.19  giving notice is decreased by the number of days by which the 
 48.20  state was late in setting the rates. 
 48.21     (b) If the state does not set rates by the date required in 
 48.22  section ~~256B.431~~ 256B.440, ~~subdivision 1,~~ nursing facilities 
 48.23  shall meet the requirement for advance notice by informing the 
 48.24  resident or person responsible for payments, on or before the 
 48.25  effective date of the increase, that a rate increase will be 
 48.26  effective on that date.  If the exact amount has not yet been 
 48.27  determined, the nursing facility may raise the rates by the 
 48.28  amount anticipated to be allowed.  Any amounts collected from 
 48.29  private pay residents in excess of the allowable rate must be 
 48.30  repaid to private pay residents with interest at the rate used 
 48.31  by the commissioner of revenue for the late payment of taxes and 
 48.32  in effect on the date the rate increase is effective.