1.1                          A bill for an act 
  1.2             relating to rural health; designating a sole community 
  1.3             hospital as an essential community provider; ensuring 
  1.4             rural representation on the health care commission; 
  1.5             establishing a demonstration project for rural 
  1.6             hospital consolidation and cooperation; establishing a 
  1.7             grant and loan program to rural hospitals for capital 
  1.8             improvements; repealing the physician license 
  1.9             surcharge; appropriating money; amending Minnesota 
  1.10            Statutes 1996, sections 62J.05, subdivision 2; 62Q.19, 
  1.11            subdivision 1; 144.1465; 144.147, subdivisions 1, 2, 
  1.12            3, and 4; and 144.1484, subdivision 1; proposing 
  1.13            coding for new law in Minnesota Statutes, chapter 144; 
  1.14            repealing Minnesota Statutes 1996, section 147.01, 
  1.15            subdivision 6. 
  1.16  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.17     Section 1.  Minnesota Statutes 1996, section 62J.05, 
  1.18  subdivision 2, is amended to read: 
  1.19     Subd. 2.  [MEMBERSHIP.] (a)  [NUMBER.] The Minnesota health 
  1.20  care commission consists of 28 members, as specified in this 
  1.21  subdivision.  A member may designate a representative to act as 
  1.22  a member of the commission in the member's absence.  The 
  1.23  governor and legislature shall coordinate appointments under 
  1.24  this subdivision to ensure gender balance ~~and ensure that~~ 
  1.25  ~~geographic areas of the state are represented in proportion to~~ 
  1.26  ~~their population~~.  Of the appointments designated to be made by 
  1.27  the governor, at least nine members must be from geographic 
  1.28  areas other than the seven-county metropolitan area, the city of 
  1.29  Duluth, or the city of Rochester.  If the membership of the 
  1.30  health care commission does not meet this requirement by July 1, 
  2.1   1997, all appointments made after that date must be made in 
  2.2   accordance with this requirement. 
  2.3      (b)  [HEALTH PLAN COMPANIES.] The commission includes four 
  2.4   members representing health plan companies, including one member 
  2.5   appointed by the Minnesota Council of Health Maintenance 
  2.6   Organizations, one member appointed by the Insurance Federation 
  2.7   of Minnesota, one member appointed by Blue Cross and Blue Shield 
  2.8   of Minnesota, and one member appointed by the governor. 
  2.9      (c)  [HEALTH CARE PROVIDERS.] The commission includes six 
  2.10  members representing health care providers, including one member 
  2.11  appointed by the Minnesota Hospital Association, one member 
  2.12  appointed by the Minnesota Medical Association, one member 
  2.13  appointed by the Minnesota Nurses' Association, one rural 
  2.14  physician appointed by the governor, and two members appointed 
  2.15  by the governor to represent providers other than hospitals, 
  2.16  physicians, and nurses. 
  2.17     (d)  [EMPLOYERS.] The commission includes four members 
  2.18  representing employers, including (1) two members appointed by 
  2.19  the Minnesota Chamber of Commerce, including one self-insured 
  2.20  employer and one small employer; and (2) two members appointed 
  2.21  by the governor. 
  2.22     (e)  [CONSUMERS.] The commission includes seven consumer 
  2.23  members, including three members appointed by the governor, one 
  2.24  of whom must represent persons over age 65; one member appointed 
  2.25  by the consortium of citizens with disabilities to represent 
  2.26  consumers with physical disabilities or chronic illness; one 
  2.27  member appointed by the mental health association of Minnesota, 
  2.28  in consultation with the Minnesota chapter of the society of 
  2.29  Americans for recovery, to represent consumers with mental 
  2.30  illness or chemical dependency; one appointed under the rules of 
  2.31  the senate; and one appointed under the rules of the house of 
  2.32  representatives. 
  2.33     (f)  [EMPLOYEE UNIONS.] The commission includes three 
  2.34  representatives of labor unions, including two appointed by the 
  2.35  AFL-CIO Minnesota and one appointed by the governor to represent 
  2.36  other unions. 
  3.1      (g)  [STATE AGENCIES.] The commission includes the 
  3.2   commissioners of commerce, employee relations, and human 
  3.3   services. 
  3.4      (h)  [REGIONAL COORDINATING BOARDS.] The commission 
  3.5   includes one member who is the chair of a regional coordinating 
  3.6   board, elected by a majority vote of the chairs of the regional 
  3.7   coordinating boards. 
  3.8      (i)  [CHAIR.] The governor shall designate the chair of the 
  3.9   commission from among the governor's appointees. 
  3.10     Sec. 2.  Minnesota Statutes 1996, section 62Q.19, 
  3.11  subdivision 1, is amended to read: 
  3.12     Subdivision 1.  [DESIGNATION.] The commissioner shall 
  3.13  designate essential community providers.  The criteria for 
  3.14  essential community provider designation shall be the following: 
  3.15     (1) a demonstrated ability to integrate applicable 
  3.16  supportive and stabilizing services with medical care for 
  3.17  uninsured persons and high-risk and special needs populations as 
  3.18  defined in section 62Q.07, subdivision 2, paragraph (e), 
  3.19  underserved, and other special needs populations; and 
  3.20     (2) a commitment to serve low-income and underserved 
  3.21  populations by meeting the following requirements: 
  3.22     (i) has nonprofit status in accordance with chapter 317A; 
  3.23     (ii) has tax exempt status in accordance with the Internal 
  3.24  Revenue Service Code, section 501(c)(3); 
  3.25     (iii) charges for services on a sliding fee schedule based 
  3.26  on current poverty income guidelines; and 
  3.27     (iv) does not restrict access or services because of a 
  3.28  client's financial limitation; 
  3.29     (3) status as a local government unit as defined in section 
  3.30  62D.02, subdivision 11, an Indian tribal government, an Indian 
  3.31  health service unit, ~~or~~ a community health board as defined in 
  3.32  chapter 145A, or a rural hospital that qualifies for a sole 
  3.33  community hospital financial assistance grant under section 
  3.34  144.1484, subdivision 1; or 
  3.35     (4) a former state hospital that specializes in the 
  3.36  treatment of cerebral palsy, spina bifida, epilepsy, closed head 
  4.1   injuries, specialized orthopedic problems, and other disabling 
  4.2   conditions.  
  4.3      Prior to designation, the commissioner shall publish the 
  4.4   names of all applicants in the State Register.  The public shall 
  4.5   have 30 days from the date of publication to submit written 
  4.6   comments to the commissioner on the application.  No designation 
  4.7   shall be made by the commissioner until the 30-day period has 
  4.8   expired. 
  4.9      The commissioner may designate an eligible provider as an 
  4.10  essential community provider for all the services offered by 
  4.11  that provider or for specific services designated by the 
  4.12  commissioner. 
  4.13     For the purpose of this subdivision, supportive and 
  4.14  stabilizing services include at a minimum, transportation, child 
  4.15  care, cultural, and linguistic services where appropriate. 
  4.16     Sec. 3.  Minnesota Statutes 1996, section 144.1465, is 
  4.17  amended to read: 
  4.18     144.1465 [FINDING AND PURPOSE.] 
  4.19     The legislature finds that rural hospitals are an integral 
  4.20  part of the health care delivery system and are fundamental to 
  4.21  the development of a sound rural economy.  The legislature 
  4.22  further finds that access to rural health care must be assured 
  4.23  to all Minnesota residents.  The rural health care system is 
  4.24  undergoing a restructuring that threatens to jeopardize access 
  4.25  in rural areas to quality health services.  To assure continued 
  4.26  rural health care access the legislature proposes to establish a 
  4.27  grant program to assist rural hospitals and their communities 
  4.28  with the development of strategic plans and transition projects~~,~~ 
  4.29  ~~provide subsidies for geographically isolated hospitals facing~~ 
  4.30  ~~closure,~~ that encourage and maintain the development of rural 
  4.31  health networks, support cooperative efforts among hospitals to 
  4.32  restructure the delivery of health care services towards 
  4.33  outpatient care, develop telemedicine relationships, encourage 
  4.34  the appropriate consolidation of rural hospital emergency 
  4.35  services, and ~~examine the problem of~~ support efforts at 
  4.36  recruitment and retention of rural physicians, nurses, and other 
  5.1   allied health care professionals.  The legislature also proposes 
  5.2   to establish a grant program to provide subsidies for 
  5.3   geographically isolated rural hospitals facing closure.  
  5.4      Sec. 4.  Minnesota Statutes 1996, section 144.147, 
  5.5   subdivision 1, is amended to read: 
  5.6      Subdivision 1.  [DEFINITION.] "Eligible rural hospital" 
  5.7   means any nonfederal, general acute care hospital that: 
  5.8      (1) is either located in a rural area, as defined in the 
  5.9   federal Medicare regulations, Code of Federal Regulations, title 
  5.10  42, section 405.1041, or located in a community with a 
  5.11  population of less than 5,000, according to United States Census 
  5.12  Bureau statistics, outside the seven-county metropolitan area; 
  5.13     (2) has ~~100~~ 50 or fewer beds; 
  5.14     (3) is not for profit; ~~and~~ 
  5.15     (4) has not been awarded a grant under the federal rural 
  5.16  health transition grant program, which would be received 
  5.17  concurrently with any portion of the grant period for this 
  5.18  program; and 
  5.19     (5) is not a controlled affiliate of a multihospital system.
  5.20     Sec. 5.  Minnesota Statutes 1996, section 144.147, 
  5.21  subdivision 2, is amended to read: 
  5.22     Subd. 2.  [GRANTS AUTHORIZED.] The commissioner shall 
  5.23  establish a program of grants to assist eligible rural 
  5.24  hospitals.  The commissioner shall award grants to hospitals and 
  5.25  communities for the purposes set forth in paragraphs (a) and (b).
  5.26     (a) Grants may be used by hospitals and their communities 
  5.27  to develop strategic plans for preserving or enhancing access to 
  5.28  health services.  At a minimum, a strategic plan must consist of:
  5.29     (1) a needs assessment to determine what health services 
  5.30  are needed and desired by the community.  The assessment must 
  5.31  include interviews with or surveys of area health professionals, 
  5.32  local community leaders, and public hearings; 
  5.33     (2) an assessment of the feasibility of providing needed 
  5.34  health services that identifies priorities and timeliness for 
  5.35  potential changes; and 
  5.36     (3) an implementation plan.  
  6.1      The strategic plan must be developed by a committee that 
  6.2   includes representatives from the hospital, local public health 
  6.3   agencies, other health providers, and consumers from the 
  6.4   community.  
  6.5      (b) The grants may also be used by eligible rural hospitals 
  6.6   that have developed strategic plans to implement transition 
  6.7   projects to modify the type and extent of services provided, in 
  6.8   order to reflect the needs of that plan.  Grants may be used by 
  6.9   hospitals under this paragraph to develop hospital-based 
  6.10  physician practices that integrate hospital and existing medical 
  6.11  practice facilities that agree to transfer their practices, 
  6.12  equipment, staffing, and administration to the hospital.  The 
  6.13  grants may also be used by the hospital to establish a health 
  6.14  provider cooperative, a telemedicine system, or a rural health 
  6.15  care system.  Not more than one-third of any grant shall be used 
  6.16  to offset losses incurred by physicians agreeing to transfer 
  6.17  their practices to hospitals.  
  6.18     Sec. 6.  Minnesota Statutes 1996, section 144.147, 
  6.19  subdivision 3, is amended to read: 
  6.20     Subd. 3.  [CONSIDERATION OF GRANTS.] In determining which 
  6.21  hospitals will receive grants under this section, the 
  6.22  commissioner shall take into account:  
  6.23     (1) improving community access to hospital or health 
  6.24  services; 
  6.25     (2) changes in service populations; 
  6.26     (3) demand for ambulatory and emergency services; 
  6.27     (4) the extent that the health needs of the community are 
  6.28  not currently being met by other providers in the service area; 
  6.29     (5) the need to recruit and retain health professionals; 
  6.30     (6) the ~~involvement and~~ extent of community support ~~of the~~ 
  6.31  ~~community and local health care providers~~; ~~and~~ 
  6.32     (7) the coordination with local community organizations, 
  6.33  such as community development and public health agencies; and 
  6.34     (8) the financial condition of the hospital. 
  6.35     Sec. 7.  Minnesota Statutes 1996, section 144.147, 
  6.36  subdivision 4, is amended to read: 
  7.1      Subd. 4.  [ALLOCATION OF GRANTS.] (a) Eligible hospitals 
  7.2   must apply to the commissioner no later than September 1 of each 
  7.3   fiscal year for grants awarded for that fiscal year.  A grant 
  7.4   may be awarded upon signing of a grant contract. 
  7.5      (b) The commissioner must make a final decision on the 
  7.6   funding of each application within 60 days of the deadline for 
  7.7   receiving applications. 
  7.8      (c) Each relevant community health board has 30 days in 
  7.9   which to review and comment to the commissioner on grant 
  7.10  applications from hospitals in their community health service 
  7.11  area. 
  7.12     (d) In determining which hospitals will receive grants 
  7.13  under this section, the commissioner shall consider the 
  7.14  following factors: 
  7.15     (1) Description of the problem, description of the project, 
  7.16  and the likelihood of successful outcome of the project.  The 
  7.17  applicant must explain clearly the nature of the health services 
  7.18  problems in their service area, how the grant funds will be 
  7.19  used, what will be accomplished, and the results expected.  The 
  7.20  applicant should describe achievable objectives, a timetable, 
  7.21  and roles and capabilities of responsible individuals and 
  7.22  organizations. 
  7.23     (2) The extent of community support for the hospital and 
  7.24  this proposed project.  The applicant should demonstrate support 
  7.25  for the hospital and for the proposed project from other local 
  7.26  health service providers and from local community and government 
  7.27  leaders.  Evidence of such support may include past commitments 
  7.28  of financial support from local individuals, organizations, or 
  7.29  government entities; and commitment of financial support, 
  7.30  in-kind services or cash, for this project. 
  7.31     (3) The comments, if any, resulting from a review of the 
  7.32  application by the community health board in whose community 
  7.33  health service area the hospital is located. 
  7.34     (e) In evaluating applications, the commissioner shall 
  7.35  score each application on a 100 point scale, assigning the 
  7.36  maximum of 70 points for an applicant's understanding of the 
  8.1   problem, description of the project, and likelihood of 
  8.2   successful outcome of the project; and a maximum of 30 points 
  8.3   for the extent of community support for the hospital and this 
  8.4   project.  The commissioner may also take into account other 
  8.5   relevant factors. 
  8.6      (f) A grant to a hospital, including hospitals that submit 
  8.7   applications as consortia, may not exceed ~~$37,500~~ $50,000 a year 
  8.8   and may not exceed a term of two years.  Prior to the receipt of 
  8.9   any grant, the hospital must certify to the commissioner that at 
  8.10  least one-half of the amount, which may include in-kind 
  8.11  services, is available for the same purposes from nonstate 
  8.12  sources.  A hospital receiving a grant under this section may 
  8.13  use the grant for any expenses incurred in the development of 
  8.14  strategic plans or the implementation of transition projects 
  8.15  with respect to which the grant is made.  Project grants may not 
  8.16  be used to retire debt incurred with respect to any capital 
  8.17  expenditure made prior to the date on which the project is 
  8.18  initiated. 
  8.19     (g) The commissioner may adopt rules to implement this 
  8.20  section. 
  8.21     Sec. 8.  [144.1475] [RURAL HOSPITAL DEMONSTRATION PROJECT.] 
  8.22     Subdivision 1.  [LEGISLATIVE PURPOSE.] The legislature 
  8.23  finds that some rural hospitals in close proximity to other like 
  8.24  hospitals are at risk of either closing or reducing operations.  
  8.25  The legislature further finds that it is in the interest of all 
  8.26  Minnesotans to move toward an efficient and cooperative rural 
  8.27  health care delivery system.  Therefore, the legislature 
  8.28  believes it is important to implement a demonstration project to 
  8.29  assist rural hospitals in consolidating or cooperating with one 
  8.30  another. 
  8.31     Subd. 2.  [ESTABLISHMENT.] The commissioner of health shall 
  8.32  establish at least three demonstration projects per year to 
  8.33  assist rural hospitals in the planning process to either 
  8.34  consolidate or cooperate with another existing hospital in its 
  8.35  service area to provide better quality health care to its 
  8.36  community.  A demonstration project must include at least two 
  9.1   eligible hospitals.  For purposes of this section, an "eligible 
  9.2   hospital" means a hospital that:  
  9.3      (1) is located outside the seven-county metropolitan area; 
  9.4      (2) has 50 or fewer licensed beds; 
  9.5      (3) is located within a 25-mile radius of another hospital; 
  9.6   and 
  9.7      (4) is not a controlled affiliate of a multihospital system.
  9.8      At least one of the eligible hospitals in a demonstration 
  9.9   project must have had a negative operating margin during the two 
  9.10  years prior to application.  
  9.11     Subd. 3.  [APPLICATION.] An eligible hospital seeking to be 
  9.12  a participant in a demonstration project must submit an 
  9.13  application to the commissioner of health detailing the 
  9.14  hospital's efforts to consolidate health care delivery in its 
  9.15  service area, cooperate with another hospital in the delivery of 
  9.16  health care, or both consolidate and cooperate.  Applications 
  9.17  must be submitted by August 1 of each fiscal year for grants 
  9.18  awarded for that fiscal year.  
  9.19     Subd. 4.  [GRANTS.] The commissioner of health shall 
  9.20  allocate a grant of up to $100,000 to each demonstration project.
  9.21     Subd. 5.  [EVALUATION.] The commissioner of health shall 
  9.22  evaluate the overall effectiveness of the demonstration 
  9.23  projects.  The commissioner may collect, from the hospitals 
  9.24  receiving grants, any information necessary to evaluate the 
  9.25  demonstration project. 
  9.26     Sec. 9.  [144.148] [RURAL HOSPITAL CAPITAL IMPROVEMENT 
  9.27  GRANT AND LOAN PROGRAM.] 
  9.28     Subdivision 1.  [PURPOSE.] The legislature finds that 
  9.29  Minnesota's rural hospital community is in need of modernization 
  9.30  to continue providing quality health care to Minnesota 
  9.31  residents.  Furthermore, funds needed for modernization projects 
  9.32  to update, remodel, and replace aging facilities and equipment 
  9.33  are scarce due to reductions in reimbursements from both public 
  9.34  and private payers.  Therefore, the legislature finds that it is 
  9.35  imperative to establish a rural hospital capital improvement 
  9.36  grant and loan program to ensure all health care delivered in 
 10.1   Minnesota is of the highest quality.  
 10.2      Subd. 2.  [DEFINITION.] "Eligible rural hospital" means a 
 10.3   hospital that: 
 10.4      (1) is located outside the seven-county metropolitan area; 
 10.5      (2) has 50 or fewer licensed hospital beds with a net 
 10.6   hospital operating margin not greater than two percent in the 
 10.7   two fiscal years prior to application; 
 10.8      (3) is 25 miles or more from another hospital; and 
 10.9      (4) is not a controlled affiliate of a multihospital system.
 10.10     Subd. 3.  [PROGRAM.] The commissioner of health shall award 
 10.11  rural hospital capital improvement grants or loans to eligible 
 10.12  rural hospitals.  A grant or loan shall not exceed $1,500,000 
 10.13  per hospital.  An eligible rural hospital may apply the funds 
 10.14  retroactively to capital improvements made during the two fiscal 
 10.15  years preceding the fiscal year in which the grant or loan was 
 10.16  received, provided the hospital met the eligibility criteria 
 10.17  during that time period.  
 10.18     Subd. 4.  [PROGRAM OVERSIGHT.] The commissioner of health 
 10.19  shall review audited financial statements of the hospital to 
 10.20  assess eligibility.  The commissioner shall determine the amount 
 10.21  of a grant or loan to be given to an eligible rural hospital.  
 10.22  The grant or loan shall be used to update, remodel, or replace 
 10.23  aging facilities and equipment necessary to maintain the 
 10.24  operations of the hospital.  
 10.25     Subd. 5.  [LOAN PAYMENT.] In those years when an eligible 
 10.26  rural hospital experiences a positive net operating margin in 
 10.27  excess of two percent, the eligible rural hospital shall pay 
 10.28  back to the state one-half of the excess above two percent until 
 10.29  the grant or loan is repaid.  
 10.30     Sec. 10.  Minnesota Statutes 1996, section 144.1484, 
 10.31  subdivision 1, is amended to read: 
 10.32     Subdivision 1.  [SOLE COMMUNITY HOSPITAL FINANCIAL 
 10.33  ASSISTANCE GRANTS.] The commissioner of health shall award 
 10.34  financial assistance grants to rural hospitals in isolated areas 
 10.35  of the state.  To qualify for a grant, a hospital must:  (1) be 
 10.36  eligible to be classified as a sole community hospital according 
 11.1   to the criteria in Code of Federal Regulations, title 42, 
 11.2   section 412.92 or be located in a community with a population of 
 11.3   less than 5,000 and located more than 25 miles from a like 
 11.4   hospital currently providing acute short-term services; (2) have 
 11.5   experienced net operating income losses in ~~the~~ two of the 
 11.6   previous three most recent consecutive hospital fiscal years for 
 11.7   which audited financial information is available; (3) consist of 
 11.8   40 or fewer licensed beds; and (4) demonstrate to the 
 11.9   commissioner that it has obtained local support for the hospital 
 11.10  and that any state support awarded under this program will not 
 11.11  be used to supplant local support for the hospital.  The 
 11.12  commissioner shall review audited financial statements of the 
 11.13  hospital to assess the extent of local support.  Evidence of 
 11.14  local support may include bonds issued by a local government 
 11.15  entity such as a city, county, or hospital district for the 
 11.16  purpose of financing hospital projects; and loans, grants, or 
 11.17  donations to the hospital from local government entities, 
 11.18  private organizations, or individuals.  The commissioner shall 
 11.19  determine the amount of the award to be given to each eligible 
 11.20  hospital based on the hospital's operating loss margin (total 
 11.21  operating losses as a percentage of total operating revenue) for 
 11.22  ~~the~~ two of the previous three most recent consecutive fiscal 
 11.23  years for which audited financial information is available and 
 11.24  the total amount of funding available.  One hundred percent of 
 11.25  the available funds will be disbursed proportionately based on 
 11.26  the operating loss margins of the eligible hospitals. 
 11.27     Sec. 11.  [APPROPRIATIONS.] 
 11.28     $....... is appropriated annually from the general fund to 
 11.29  the commissioner of health for the rural hospital demonstration 
 11.30  project described in Minnesota Statutes, section 144.1475. 
 11.31     $....... is appropriated annually from the general fund to 
 11.32  the commissioner of health for the purpose of the rural hospital 
 11.33  capital improvement grant and loan program described in 
 11.34  Minnesota Statutes, section 144.148. 
 11.35     Sec. 12.  [REPEALER.] 
 11.36     Minnesota Statutes 1996, section 147.01, subdivision 6, is 
 12.1   repealed. 
 12.2      Sec. 13.  [EFFECTIVE DATE.] 
 12.3      Sections 8 and 9 are effective the day following final 
 12.4   enactment.