1.1                          A bill for an act 
  1.2             relating to health; exempting certain nursing 
  1.3             facilities from limits on operating cost per diems; 
  1.4             amending Minnesota Statutes 1996, section 256B.431, 
  1.5             subdivision 25.  
  1.6   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.7      Section 1.  Minnesota Statutes 1996, section 256B.431, 
  1.8   subdivision 25, is amended to read: 
  1.9      Subd. 25.  [CHANGES TO NURSING FACILITY REIMBURSEMENT 
  1.10  BEGINNING JULY 1, 1995.] The nursing facility reimbursement 
  1.11  changes in paragraphs (a) to (h) shall apply in the sequence 
  1.12  specified to Minnesota Rules, parts 9549.0010 to 9549.0080, and 
  1.13  this section, beginning July 1, 1995. 
  1.14     (a) The eight-cent adjustment to care-related rates in 
  1.15  subdivision 22, paragraph (e), shall no longer apply. 
  1.16     (b) For rate years beginning on or after July 1, 1995, the 
  1.17  commissioner shall limit a nursing facility's allowable 
  1.18  operating per diem for each case mix category for each rate year 
  1.19  as in clauses (1) to (3). 
  1.20     (1) For the rate year beginning July 1, 1995, the 
  1.21  commissioner shall group nursing facilities into two groups, 
  1.22  freestanding and nonfreestanding, within each geographic group, 
  1.23  using their operating cost per diem for the case mix A 
  1.24  classification.  A nonfreestanding nursing facility is a nursing 
  1.25  facility whose other operating cost per diem is subject to the 
  2.1   hospital attached, short length of stay, or the rule 80 limits.  
  2.2   All other nursing facilities shall be considered freestanding 
  2.3   nursing facilities.  The commissioner shall then array all 
  2.4   nursing facilities in each grouping by their allowable case mix 
  2.5   A operating cost per diem.  In calculating a nursing facility's 
  2.6   operating cost per diem for this purpose, the commissioner shall 
  2.7   exclude the raw food cost per diem related to providing special 
  2.8   diets that are based on religious beliefs, as determined in 
  2.9   subdivision 2b, paragraph (h).  For those nursing facilities in 
  2.10  each grouping whose case mix A operating cost per diem: 
  2.11     (i) is at or below the median minus 1.0 standard deviation 
  2.12  of the array, the commissioner shall limit the nursing 
  2.13  facility's allowable operating cost per diem for each case mix 
  2.14  category to the lesser of the prior reporting year's allowable 
  2.15  operating cost per diems plus the inflation factor as 
  2.16  established in paragraph (f), clause (2), increased by six 
  2.17  percentage points, or the current reporting year's corresponding 
  2.18  allowable operating cost per diem; 
  2.19     (ii) is between minus .5 standard deviation and minus 1.0 
  2.20  standard deviation below the median of the array, the 
  2.21  commissioner shall limit the nursing facility's allowable 
  2.22  operating cost per diem for each case mix category to the lesser 
  2.23  of the prior reporting year's allowable operating cost per diems 
  2.24  plus the inflation factor as established in paragraph (f), 
  2.25  clause (2), increased by four percentage points, or the current 
  2.26  reporting year's corresponding allowable operating cost per 
  2.27  diem; or 
  2.28     (iii) is equal to or above minus .5 standard deviation 
  2.29  below the median of the array, the commissioner shall limit the 
  2.30  nursing facility's allowable operating cost per diem for each 
  2.31  case mix category to the lesser of the prior reporting year's 
  2.32  allowable operating cost per diems plus the inflation factor as 
  2.33  established in paragraph (f), clause (2), increased by three 
  2.34  percentage points, or the current reporting year's corresponding 
  2.35  allowable operating cost per diem. 
  2.36     (2) For the rate year beginning on July 1, 1996, the 
  3.1   commissioner shall limit the nursing facility's allowable 
  3.2   operating cost per diem for each case mix category to the lesser 
  3.3   of the prior reporting year's allowable operating cost per diems 
  3.4   plus the inflation factor as established in paragraph (f), 
  3.5   clause (2), increased by one percentage point or the current 
  3.6   reporting year's corresponding allowable operating cost per 
  3.7   diems; and 
  3.8      (3) For rate years beginning on or after July 1, 1997, the 
  3.9   commissioner shall limit the nursing facility's allowable 
  3.10  operating cost per diem for each case mix category to the lesser 
  3.11  of the reporting year prior to the current reporting year's 
  3.12  allowable operating cost per diems plus the inflation factor as 
  3.13  established in paragraph (f), clause (2), or the current 
  3.14  reporting year's corresponding allowable operating cost per 
  3.15  diems. 
  3.16     (c) For rate years beginning on July 1, 1995, the 
  3.17  commissioner shall limit the allowable operating cost per diems 
  3.18  for high cost nursing facilities.  After application of the 
  3.19  limits in paragraph (b) to each nursing facility's operating 
  3.20  cost per diems, the commissioner shall group nursing facilities 
  3.21  into two groups, freestanding or nonfreestanding, within each 
  3.22  geographic group.  A nonfreestanding nursing facility is a 
  3.23  nursing facility whose other operating cost per diems are 
  3.24  subject to hospital attached, short length of stay, or rule 80 
  3.25  limits.  All other nursing facilities shall be considered 
  3.26  freestanding nursing facilities.  The commissioner shall then 
  3.27  array all nursing facilities within each grouping by their 
  3.28  allowable case mix A operating cost per diems.  In calculating a 
  3.29  nursing facility's operating cost per diem for this purpose, the 
  3.30  commissioner shall exclude the raw food cost per diem related to 
  3.31  providing special diets that are based on religious beliefs, as 
  3.32  determined in subdivision 2b, paragraph (h).  For those nursing 
  3.33  facilities in each grouping whose case mix A operating cost per 
  3.34  diem exceeds 1.0 standard deviation above the median, the 
  3.35  commissioner shall reduce their allowable operating cost per 
  3.36  diems by two percent.  For those nursing facilities in each 
  4.1   grouping whose case mix A operating cost per diem exceeds 0.5 
  4.2   standard deviation above the median but is less than or equal to 
  4.3   1.0 standard deviation above the median, the commissioner shall 
  4.4   reduce their allowable operating cost per diems by one percent. 
  4.5      (d) For rate years beginning on or after July 1, 1996, the 
  4.6   commissioner shall limit the allowable operating cost per diems 
  4.7   for high cost nursing facilities.  After application of the 
  4.8   limits in paragraph (b) to each nursing facility's operating 
  4.9   cost per diems, the commissioner shall group nursing facilities 
  4.10  into two groups, freestanding or nonfreestanding, within each 
  4.11  geographic group.  A nonfreestanding nursing facility is a 
  4.12  nursing facility whose other operating cost per diems are 
  4.13  subject to hospital attached, short length of stay, or rule 80 
  4.14  limits.  All other nursing facilities shall be considered 
  4.15  freestanding nursing facilities.  The commissioner shall then 
  4.16  array all nursing facilities within each grouping by their 
  4.17  allowable case mix A operating cost per diems.  In calculating a 
  4.18  nursing facility's operating cost per diem for this purpose, the 
  4.19  commissioner shall exclude the raw food cost per diem related to 
  4.20  providing special diets that are based on religious beliefs, as 
  4.21  determined in subdivision 2b, paragraph (h).  In those nursing 
  4.22  facilities in each grouping whose case mix A operating cost per 
  4.23  diem exceeds 1.0 standard deviation above the median, the 
  4.24  commissioner shall reduce their allowable operating cost per 
  4.25  diems by three percent.  For those nursing facilities in each 
  4.26  grouping whose case mix A operating cost per diem exceeds 0.5 
  4.27  standard deviation above the median but is less than or equal to 
  4.28  1.0 standard deviation above the median, the commissioner shall 
  4.29  reduce their allowable operating cost per diems by two percent. 
  4.30     (e) For rate years beginning on or after July 1, 1995, the 
  4.31  commissioner shall determine a nursing facility's efficiency 
  4.32  incentive by first computing the allowable difference, which is 
  4.33  the lesser of $4.50 or the amount by which the facility's other 
  4.34  operating cost limit exceeds its nonadjusted other operating 
  4.35  cost per diem for that rate year.  The commissioner shall 
  4.36  compute the efficiency incentive by: 
  5.1      (1) subtracting the allowable difference from $4.50 and 
  5.2   dividing the result by $4.50; 
  5.3      (2) multiplying 0.20 by the ratio resulting from clause 
  5.4   (1), and then; 
  5.5      (3) adding 0.50 to the result from clause (2); and 
  5.6      (4) multiplying the result from clause (3) times the 
  5.7   allowable difference. 
  5.8      The nursing facility's efficiency incentive payment shall 
  5.9   be the lesser of $2.25 or the product obtained in clause (4). 
  5.10     (f) For rate years beginning on or after July 1, 1995, the 
  5.11  forecasted price index for a nursing facility's allowable 
  5.12  operating cost per diems shall be determined under clauses (1) 
  5.13  to (3) using the change in the Consumer Price Index-All Items 
  5.14  (United States city average) (CPI-U) or the change in the 
  5.15  Nursing Home Market Basket, both as forecasted by Data Resources 
  5.16  Inc., whichever is applicable.  The commissioner shall use the 
  5.17  indices as forecasted in the fourth quarter of the calendar year 
  5.18  preceding the rate year, subject to subdivision 2l, paragraph 
  5.19  (c).  If, as a result of federal legislative or administrative 
  5.20  action, the methodology used to calculate the Consumer Price 
  5.21  Index-All Items (United States city average) (CPI-U) changes, 
  5.22  the commissioner shall develop a conversion factor or other 
  5.23  methodology to convert the CPI-U index factor that results from 
  5.24  the new methodology to an index factor that approximates, as 
  5.25  closely as possible, the index factor that would have resulted 
  5.26  from application of the original CPI-U methodology prior to any 
  5.27  changes in methodology.  The commissioner shall use the 
  5.28  conversion factor or other methodology to calculate an adjusted 
  5.29  inflation index.  The adjusted inflation index must be used to 
  5.30  calculate payment rates under this section instead of the CPI-U 
  5.31  index specified in paragraph (d).  If the commissioner is 
  5.32  required to develop an adjusted inflation index, the 
  5.33  commissioner shall report to the legislature as part of the next 
  5.34  budget submission the fiscal impact of applying this index. 
  5.35     (1) The CPI-U forecasted index for allowable operating cost 
  5.36  per diems shall be based on the 21-month period from the 
  6.1   midpoint of the nursing facility's reporting year to the 
  6.2   midpoint of the rate year following the reporting year. 
  6.3      (2) The Nursing Home Market Basket forecasted index for 
  6.4   allowable operating costs and per diem limits shall be based on 
  6.5   the 12-month period between the midpoints of the two reporting 
  6.6   years preceding the rate year. 
  6.7      (3) For rate years beginning on or after July 1, 1996, the 
  6.8   forecasted index for operating cost limits referred to in 
  6.9   subdivision 21, paragraph (b), shall be based on the CPI-U for 
  6.10  the 12-month period between the midpoints of the two reporting 
  6.11  years preceding the rate year. 
  6.12     (g) After applying these provisions for the respective rate 
  6.13  years, the commissioner shall index these allowable operating 
  6.14  costs per diems by the inflation factor provided for in 
  6.15  paragraph (f), clause (1), and add the nursing facility's 
  6.16  efficiency incentive as computed in paragraph (e). 
  6.17     (h) A nursing facility licensed for 302 beds on September 
  6.18  30, 1993, that was approved under the moratorium exception 
  6.19  process in section 144A.073 for a partial replacement, and 
  6.20  completed the replacement project in December 1994, is exempt 
  6.21  from paragraphs (b) to (d) for rate years beginning on or after 
  6.22  July 1, 1995. 
  6.23     (i) Notwithstanding Laws 1996, chapter 451, article 3, 
  6.24  section 11, paragraph (h), for the rate years beginning on July 
  6.25  1, 1996, July 1, 1997, and July 1, 1998, a nursing facility 
  6.26  licensed for 40 beds effective May 1, 1992, with a subsequent 
  6.27  increase of 20 Medicare/Medicaid certified beds, effective 
  6.28  January 26, 1993, in accordance with an increase in licensure is 
  6.29  exempt from paragraphs (b) to (d). 
  6.30     (j) A nursing facility licensed for 80 beds on September 
  6.31  30, 1996, located in Redwood county, is exempt from paragraphs 
  6.32  (b) to (d) for rate years beginning on or after July 1, 1997.