1.1                          A bill for an act 
  1.2             relating to health; modifying certain nursing facility 
  1.3             reimbursement rates; amending Minnesota Statutes 1997 
  1.4             Supplement, section 256B.431, subdivision 26. 
  1.5   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.6      Section 1.  Minnesota Statutes 1997 Supplement, section 
  1.7   256B.431, subdivision 26, is amended to read: 
  1.8      Subd. 26.  [CHANGES TO NURSING FACILITY REIMBURSEMENT 
  1.9   BEGINNING JULY 1, 1997.] The nursing facility reimbursement 
  1.10  changes in paragraphs (a) to (f) shall apply in the sequence 
  1.11  specified in Minnesota Rules, parts 9549.0010 to 9549.0080, and 
  1.12  this section, beginning July 1, 1997. 
  1.13     (a) For rate years beginning on or after July 1, 1997, the 
  1.14  commissioner shall limit a nursing facility's allowable 
  1.15  operating per diem for each case mix category for each rate year.
  1.16  The commissioner shall group nursing facilities into two groups, 
  1.17  freestanding and nonfreestanding, within each geographic group, 
  1.18  using their operating cost per diem for the case mix A 
  1.19  classification.  A nonfreestanding nursing facility is a nursing 
  1.20  facility whose other operating cost per diem is subject to the 
  1.21  hospital attached, short length of stay, or the rule 80 limits.  
  1.22  All other nursing facilities shall be considered freestanding 
  1.23  nursing facilities.  The commissioner shall then array all 
  1.24  nursing facilities in each grouping by their allowable case mix 
  1.25  A operating cost per diem.  In calculating a nursing facility's 
  2.1   operating cost per diem for this purpose, the commissioner shall 
  2.2   exclude the raw food cost per diem related to providing special 
  2.3   diets that are based on religious beliefs, as determined in 
  2.4   subdivision 2b, paragraph (h).  For those nursing facilities in 
  2.5   each grouping whose case mix A operating cost per diem: 
  2.6      (1) is at or below the median of the array, the 
  2.7   commissioner shall limit the nursing facility's allowable 
  2.8   operating cost per diem for each case mix category to the lesser 
  2.9   of the prior reporting year's allowable operating cost per diem 
  2.10  as specified in Laws 1996, chapter 451, article 3, section 11, 
  2.11  paragraph (h), plus the inflation factor as established in 
  2.12  paragraph (d), clause (2), increased by two percentage points, 
  2.13  or the current reporting year's corresponding allowable 
  2.14  operating cost per diem; or 
  2.15     (2) is above the median of the array, the commissioner 
  2.16  shall limit the nursing facility's allowable operating cost per 
  2.17  diem for each case mix category to the lesser of the prior 
  2.18  reporting year's allowable operating cost per diem as specified 
  2.19  in Laws 1996, chapter 451, article 3, section 11, paragraph (h), 
  2.20  plus the inflation factor as established in paragraph (d), 
  2.21  clause (2), increased by one percentage point, or the current 
  2.22  reporting year's corresponding allowable operating cost per diem.
  2.23     (b) For rate years beginning on or after July 1, 1997, the 
  2.24  commissioner shall limit the allowable operating cost per diem 
  2.25  for high cost nursing facilities.  After application of the 
  2.26  limits in paragraph (a) to each nursing facility's operating 
  2.27  cost per diem, the commissioner shall group nursing facilities 
  2.28  into two groups, freestanding or nonfreestanding, within each 
  2.29  geographic group.  A nonfreestanding nursing facility is a 
  2.30  nursing facility whose other operating cost per diem are subject 
  2.31  to hospital attached, short length of stay, or rule 80 limits.  
  2.32  All other nursing facilities shall be considered freestanding 
  2.33  nursing facilities.  The commissioner shall then array all 
  2.34  nursing facilities within each grouping by their allowable case 
  2.35  mix A operating cost per diem.  In calculating a nursing 
  2.36  facility's operating cost per diem for this purpose, the 
  3.1   commissioner shall exclude the raw food cost per diem related to 
  3.2   providing special diets that are based on religious beliefs, as 
  3.3   determined in subdivision 2b, paragraph (h).  For those nursing 
  3.4   facilities in each grouping whose case mix A operating cost per 
  3.5   diem exceeds 1.0 standard deviation above the median, the 
  3.6   commissioner shall reduce their allowable operating cost per 
  3.7   diem by three percent.  For those nursing facilities in each 
  3.8   grouping whose case mix A operating cost per diem exceeds 0.5 
  3.9   standard deviation above the median but is less than or equal to 
  3.10  1.0 standard deviation above the median, the commissioner shall 
  3.11  reduce their allowable operating cost per diem by two percent.  
  3.12  However, in no case shall a nursing facility's operating cost 
  3.13  per diem be reduced below its grouping's limit established at 
  3.14  0.5 standard deviations above the median. 
  3.15     (c) For rate years beginning on or after July 1, 1997, the 
  3.16  commissioner shall determine a nursing facility's efficiency 
  3.17  incentive by first computing the allowable difference, which is 
  3.18  the lesser of $4.50 or the amount by which the facility's other 
  3.19  operating cost limit exceeds its nonadjusted other operating 
  3.20  cost per diem for that rate year.  The commissioner shall 
  3.21  compute the efficiency incentive by: 
  3.22     (1) subtracting the allowable difference from $4.50 and 
  3.23  dividing the result by $4.50; 
  3.24     (2) multiplying 0.20 by the ratio resulting from clause 
  3.25  (1), and then; 
  3.26     (3) adding 0.50 to the result from clause (2); and 
  3.27     (4) multiplying the result from clause (3) times the 
  3.28  allowable difference. 
  3.29     The nursing facility's efficiency incentive payment shall 
  3.30  be the lesser of $2.25 or the product obtained in clause (4). 
  3.31     (d) For rate years beginning on or after July 1, 1997, the 
  3.32  forecasted price index for a nursing facility's allowable 
  3.33  operating cost per diem shall be determined under clauses (1) 
  3.34  and (2) using the change in the Consumer Price Index-All Items 
  3.35  (United States city average) (CPI-U) as forecasted by Data 
  3.36  Resources, Inc.  The commissioner shall use the indices as 
  4.1   forecasted in the fourth quarter of the calendar year preceding 
  4.2   the rate year, subject to subdivision 2l, paragraph (c).  
  4.3      (1) The CPI-U forecasted index for allowable operating cost 
  4.4   per diem shall be based on the 21-month period from the midpoint 
  4.5   of the nursing facility's reporting year to the midpoint of the 
  4.6   rate year following the reporting year. 
  4.7      (2) For rate years beginning on or after July 1, 1997, the 
  4.8   forecasted index for operating cost limits referred to in 
  4.9   subdivision 21, paragraph (b), shall be based on the CPI-U for 
  4.10  the 12-month period between the midpoints of the two reporting 
  4.11  years preceding the rate year. 
  4.12     (e) After applying these provisions for the respective rate 
  4.13  years, the commissioner shall index these allowable operating 
  4.14  cost per diem by the inflation factor provided for in paragraph 
  4.15  (d), clause (1), and add the nursing facility's efficiency 
  4.16  incentive as computed in paragraph (c). 
  4.17     (f) For rate years beginning on or after July 1, 1997, the 
  4.18  total operating cost payment rates for a nursing facility shall 
  4.19  be the greater of the total operating cost payment rates 
  4.20  determined under this section or the total operating cost 
  4.21  payment rates in effect on June 30, 1997, subject to rate 
  4.22  adjustments due to field audit or rate appeal resolution.  This 
  4.23  provision shall not apply to subsequent field audit adjustments 
  4.24  of the nursing facility's operating cost rates for rate years 
  4.25  beginning on or after July 1, 1997. 
  4.26     (g) For the rate years beginning on July 1, 1997, ~~and~~ July 
  4.27  1, 1998, and July 1, 1999, a nursing facility licensed for 40 
  4.28  beds effective May 1, 1992, with a subsequent increase of 20 
  4.29  Medicare/Medicaid certified beds, effective January 26, 1993, in 
  4.30  accordance with an increase in licensure is exempt from 
  4.31  paragraphs (a) and (b). 
  4.32     (h) For a nursing facility whose construction project was 
  4.33  authorized according to section 144A.073, subdivision 5, 
  4.34  paragraph (g), the operating cost payment rates for the third 
  4.35  location shall be determined based on Minnesota Rules, part 
  4.36  9549.0057.  Paragraphs (a) and (b) shall not apply until the 
  5.1   second rate year after the settle-up cost report is filed.  
  5.2   Notwithstanding subdivision 2b, paragraph (g), real estate taxes 
  5.3   and special assessments payable by the third location, a 
  5.4   501(c)(3) nonprofit corporation, shall be included in the 
  5.5   payment rates determined under this subdivision for all 
  5.6   subsequent rate years. 
  5.7      (i) For the rate year beginning July 1, 1997, the 
  5.8   commissioner shall compute the payment rate for a nursing 
  5.9   facility licensed for 94 beds on September 30, 1996, that 
  5.10  applied in October 1993 for approval of a total replacement 
  5.11  under the moratorium exception process in section 144A.073, and 
  5.12  completed the approved replacement in June 1995, with other 
  5.13  operating cost spend-up limit under paragraph (a), increased by 
  5.14  $3.98, and after computing the facility's payment rate according 
  5.15  to this section, the commissioner shall make a one-year positive 
  5.16  rate adjustment of $3.19 for operating costs related to the 
  5.17  newly constructed total replacement, without application of 
  5.18  paragraphs (a) and (b).  The facility's per diem, before the 
  5.19  $3.19 adjustment, shall be used as the prior reporting year's 
  5.20  allowable operating cost per diem for payment rate calculation 
  5.21  for the rate year beginning July 1, 1998.  A facility described 
  5.22  in this paragraph is exempt from paragraph (b) for the rate 
  5.23  years beginning July 1, 1997, and July 1, 1998. 
  5.24     (j) For the purpose of applying the limit stated in 
  5.25  paragraph (a), a nursing facility in Kandiyohi county licensed 
  5.26  for 86 beds that was granted hospital-attached status on 
  5.27  December 1, 1994, shall have the prior year's allowable 
  5.28  care-related per diem increased by $3.207 and the prior year's 
  5.29  other operating cost per diem increased by $4.777 before adding 
  5.30  the inflation in paragraph (d), clause (2), for the rate year 
  5.31  beginning on July 1, 1997. 
  5.32     (k) For the purpose of applying the limit stated in 
  5.33  paragraph (a), a 117 bed nursing facility located in Pine county 
  5.34  shall have the prior year's allowable other operating cost per 
  5.35  diem increased by $1.50 before adding the inflation in paragraph 
  5.36  (d), clause (2), for the rate year beginning on July 1, 1997. 
  6.1      (l) For the purpose of applying the limit under paragraph 
  6.2   (a), a nursing facility in Hibbing licensed for 192 beds shall 
  6.3   have the prior year's allowable other operating cost per diem 
  6.4   increased by $2.67 before adding the inflation in paragraph (d), 
  6.5   clause (2), for the rate year beginning July 1, 1997.