1997 Minnesota Statutes

     256B.431 Rate determination. 

    Subdivision 1.    In general.  The commissioner shall 
 determine prospective payment rates for resident care costs.  In 
 determining the rates, the commissioner shall group nursing 
 facilities according to different levels of care and geographic 
 location until July 1, 1985.  For rates established on or after 
 July 1, 1985, the commissioner shall develop procedures for 
 determining operating cost payment rates that take into account 
 the mix of resident needs, geographic location, and other 
 factors as determined by the commissioner.  The commissioner 
 shall consider whether the fact that a facility is attached to a 
 hospital or has an average length of stay of 180 days or less 
 should be taken into account in determining rates.  The 
 commissioner shall consider the use of the standard metropolitan 
 statistical areas when developing groups by geographic 
 location.  Until the commissioner establishes procedures for 
 determining operating cost payment rates, the commissioner shall 
 group all convalescent and nursing care units attached to 
 hospitals into one group for purposes of determining 
 reimbursement for operating costs.  On or before June 15, 1983, 
 the commissioner shall mail notices to each nursing facility of 
 the rates to be effective from July 1 of that year to June 30 of 
 the following year.  In subsequent years, the commissioner shall 
 provide notice to each nursing facility on or before May 1 of 
 the rates effective for the following rate year.  If a statute 
 enacted after May 1 affects the rates, the commissioner shall 
 provide a revised notice to each nursing facility as soon as 
 possible.  

    The commissioner shall establish, by rule, limitations on 
 compensation recognized in the historical base for top 
 management personnel.  For rate years beginning July 1, 1985, 
 the commissioner shall not provide, by rule, limitations on top 
 management personnel.  Compensation for top management personnel 
 shall continue to be categorized as a general and administrative 
 cost and is subject to any limits imposed on that cost 
 category.  The commissioner shall also establish, by rule, 
 limitations on allowable nursing hours for each level of care 
 for the rate years beginning July 1, 1983 and July 1, 1984.  For 
 the rate year beginning July 1, 1984, nursing facilities in 
 which the nursing hours exceeded 2.9 hours per day for skilled 
 nursing care or 2.3 hours per day for intermediate care for the 
 reporting year ending on September 30, 1983, shall be limited to 
 a maximum of 3.2 hours per day for skilled nursing care and 2.6 
 hours per day for intermediate care.  

    Subd. 2.    Operating costs, 1984-1985.  (a) For the 
 rate year beginning July 1, 1984, the commissioner shall 
 establish, by rule, procedures for determining per diem 
 reimbursement for operating costs based on actual resident 
 days.  The commissioner shall disallow any portion of the 
 general and administration cost category, exclusive of fringe 
 benefits and payroll taxes, that exceeds:  

    (1) for nursing facilities with more than 100 certified 
 beds in total, the greater of ten percent or the 25th percentile 
 of general and administrative cost per diems of nursing 
 facilities grouped by level of care; 

    (2) for nursing facilities with fewer than 101 but more 
 than 40 certified beds in total, the greater of 12 percent or 
 the 25th percentile of general and administrative cost per diems 
 of nursing facilities grouped by level of care; 

    (3) for nursing facilities with 40 or fewer certified beds 
 in total, the greater of 14 percent or the 25th percentile of 
 general and administrative cost per diems of nursing facilities 
 grouped by level of care; and 

    (4) 15 percent for convalescent and nursing care units 
 attached to hospitals for the rate year beginning July 1, 1984, 
 of the expenditures in all operating cost categories except 
 fringe benefits, payroll taxes, and general and administration.  

    Subd. 2a.    Operating costs, 1983-1984.  For the rate 
 year beginning July 1, 1983, and ending June 30, 1984, the 
 prospective operating cost payment rate for each nursing 
 facility shall be determined by the commissioner based on the 
 allowed historical operating costs as reported in the most 
 recent cost report received by December 31, 1982 and audited by 
 March 1, 1983, and may be subsequently adjusted to reflect the 
 costs allowed.  To determine the allowed historical operating 
 cost, the commissioner shall update the historical per diem 
 shown in those cost reports to June 30, 1983, using a nine 
 percent annual rate of increase after applying the general and 
 administrative cost limitation described in subdivision 2.  The 
 commissioner shall calculate the 60th percentile of actual 
 allowable historical operating cost per diems for each group of 
 nursing facilities established under subdivision 1.  

    (a) Within each group, each nursing facility whose actual 
 allowable historical operating cost per diem as determined under 
 this subdivision is above the 60th percentile shall receive the 
 60th percentile increased by six percent plus 80 percent of the 
 difference between its actual allowable operating cost per diem 
 and the 60th percentile.  

    (b) Within each group, each nursing facility whose actual 
 allowable historical operating cost per diem is at or below the 
 60th percentile shall receive that actual allowable historical 
 operating cost per diem increased by six percent.  

    For the rate year beginning July 1, 1984, and ending June 
 30, 1985, the prospective operating cost payment rate for each 
 nursing facility shall be determined by the commissioner based 
 on actual allowable historical operating costs incurred during 
 the reporting year preceding the rate year.  The commissioner 
 shall analyze and evaluate each nursing facility's report of 
 allowable operating costs incurred by the nursing facility 
 during the reporting year immediately preceding the rate year.  
 The actual allowable historical operating costs, after the 
 commissioner's analysis and evaluation, shall be added together 
 and divided by the number of actual resident days to compute the 
 actual allowable historical operating cost per diems.  The 
 commissioner shall calculate the 60th percentile of actual 
 allowable historical operating cost per diems for each group of 
 nursing facilities established under subdivision 1.  

    (c) Within each group, each nursing facility whose actual 
 allowable historical operating cost per diem is above the 60th 
 percentile of payment rates shall receive the 60th percentile 
 increased at an annual rate of six percent plus 75 percent of 
 the difference between its actual allowable historical operating 
 cost per diem and the 60th percentile.  

    (d) Within each group, each nursing facility whose actual 
 allowable historical operating cost per diem is at or below the 
 60th percentile shall receive that actual allowable historical 
 operating cost per diem increased at an annual rate of six 
 percent.  

    Subd. 2b.    Operating costs, after July 1, 1985.  (a) 
 For rate years beginning on or after July 1, 1985, the 
 commissioner shall establish procedures for determining per diem 
 reimbursement for operating costs.  

    (b) The commissioner shall contract with an econometric 
 firm with recognized expertise in and access to national 
 economic change indices that can be applied to the appropriate 
 cost categories when determining the operating cost payment rate.

    (c) The commissioner shall analyze and evaluate each 
 nursing facility's cost report of allowable operating costs 
 incurred by the nursing facility during the reporting year 
 immediately preceding the rate year for which the payment rate 
 becomes effective.  

    (d) The commissioner shall establish limits on actual 
 allowable historical operating cost per diems based on cost 
 reports of allowable operating costs for the reporting year that 
 begins October 1, 1983, taking into consideration relevant 
 factors including resident needs, geographic location, size of 
 the nursing facility, and the costs that must be incurred for 
 the care of residents in an efficiently and economically 
 operated nursing facility.  In developing the geographic groups 
 for purposes of reimbursement under this section, the 
 commissioner shall ensure that nursing facilities in any county 
 contiguous to the Minneapolis-St. Paul seven-county metropolitan 
 area are included in the same geographic group.  The limits 
 established by the commissioner shall not be less, in the 
 aggregate, than the 60th percentile of total actual allowable 
 historical operating cost per diems for each group of nursing 
 facilities established under subdivision 1 based on cost reports 
 of allowable operating costs in the previous reporting year.  
 For rate years beginning on or after July 1, 1989, facilities 
 located in geographic group I as described in Minnesota Rules, 
 part 9549.0052, on January 1, 1989, may choose to have the 
 commissioner apply either the care related limits or the other 
 operating cost limits calculated for facilities located in 
 geographic group II, or both, if either of the limits calculated 
 for the group II facilities is higher.  The efficiency incentive 
 for geographic group I nursing facilities must be calculated 
 based on geographic group I limits.  The phase-in must be 
 established utilizing the chosen limits.  For purposes of these 
 exceptions to the geographic grouping requirements, the 
 definitions in Minnesota Rules, parts 9549.0050 to 9549.0059 
 (Emergency), and 9549.0010 to 9549.0080, apply.  The limits 
 established under this paragraph remain in effect until the 
 commissioner establishes a new base period.  Until the new base 
 period is established, the commissioner shall adjust the limits 
 annually using the appropriate economic change indices 
 established in paragraph (e).  In determining allowable 
 historical operating cost per diems for purposes of setting 
 limits and nursing facility payment rates, the commissioner 
 shall divide the allowable historical operating costs by the 
 actual number of resident days, except that where a nursing 
 facility is occupied at less than 90 percent of licensed 
 capacity days, the commissioner may establish procedures to 
 adjust the computation of the per diem to an imputed occupancy 
 level at or below 90 percent.  The commissioner shall establish 
 efficiency incentives as appropriate.  The commissioner may 
 establish efficiency incentives for different operating cost 
 categories.  The commissioner shall consider establishing 
 efficiency incentives in care related cost categories.  The 
 commissioner may combine one or more operating cost categories 
 and may use different methods for calculating payment rates for 
 each operating cost category or combination of operating cost 
 categories.  For the rate year beginning on July 1, 1985, the 
 commissioner shall: 

    (1) allow nursing facilities that have an average length of 
 stay of 180 days or less in their skilled nursing level of care, 
 125 percent of the care related limit and 105 percent of the 
 other operating cost limit established by rule; and 

    (2) exempt nursing facilities licensed on July 1, 1983, by 
 the commissioner to provide residential services for the 
 physically handicapped under Minnesota Rules, parts 9570.2000 to 
 9570.3600, from the care related limits and allow 105 percent of 
 the other operating cost limit established by rule. 

    For the purpose of calculating the other operating cost 
 efficiency incentive for nursing facilities referred to in 
 clause (1)  or (2), the commissioner shall use the other 
 operating cost limit established by rule before application of 
 the 105 percent. 

    (e) The commissioner shall establish a composite index or 
 indices by determining the appropriate economic change 
 indicators to be applied to specific operating cost categories 
 or combination of operating cost categories.  

    (f) Each nursing facility shall receive an operating cost 
 payment rate equal to the sum of the nursing facility's 
 operating cost payment rates for each operating cost category.  
 The operating cost payment rate for an operating cost category 
 shall be the lesser of the nursing facility's historical 
 operating cost in the category increased by the appropriate 
 index established in paragraph (e) for the operating cost 
 category plus an efficiency incentive established pursuant to 
 paragraph (d) or the limit for the operating cost category 
 increased by the same index.  If a nursing facility's actual 
 historic operating costs are greater than the prospective 
 payment rate for that rate year, there shall be no retroactive 
 cost settle-up.  In establishing payment rates for one or more 
 operating cost categories, the commissioner may establish 
 separate rates for different classes of residents based on their 
 relative care needs.  

    (g) The commissioner shall include the reported actual real 
 estate tax liability or payments in lieu of real estate tax of 
 each nursing facility as an operating cost of that nursing 
 facility.  Allowable costs under this subdivision for payments 
 made by a nonprofit nursing facility that are in lieu of real 
 estate taxes shall not exceed the amount which the nursing 
 facility would have paid to a city or township and county for 
 fire, police, sanitation services, and road maintenance costs 
 had real estate taxes been levied on that property for those 
 purposes.  For rate years beginning on or after July 1, 1987, 
 the reported actual real estate tax liability or payments in 
 lieu of real estate tax of nursing facilities shall be adjusted 
 to include an amount equal to one-half of the dollar change in 
 real estate taxes from the prior year.  The commissioner shall 
 include a reported actual special assessment, and reported 
 actual license fees required by the Minnesota department of 
 health, for each nursing facility as an operating cost of that 
 nursing facility.  For rate years beginning on or after July 1, 
 1989, the commissioner shall include a nursing facility's 
 reported public employee retirement act contribution for the 
 reporting year as apportioned to the care-related operating cost 
 categories and other operating cost categories multiplied by the 
 appropriate composite index or indices established pursuant to 
 paragraph (e) as costs under this paragraph.  Total adjusted 
 real estate tax liability, payments in lieu of real estate tax, 
 actual special assessments paid, the indexed public employee 
 retirement act contribution, and license fees paid as required 
 by the Minnesota department of health, for each nursing facility 
 (1) shall be divided by actual resident days in order to compute 
 the operating cost payment rate for this operating cost 
 category, (2) shall not be used to compute the care-related 
 operating cost limits or other operating cost limits established 
 by the commissioner, and (3) shall not be increased by the 
 composite index or indices established pursuant to paragraph 
 (e), unless otherwise indicated in this paragraph. 

    (h) For rate years beginning on or after July 1, 1987, the 
 commissioner shall adjust the rates of a nursing facility that 
 meets the criteria for the special dietary needs of its 
 residents and the requirements in section 31.651.  The 
 adjustment for raw food cost shall be the difference between the 
 nursing facility's allowable historical raw food cost per diem 
 and 115 percent of the median historical allowable raw food cost 
 per diem of the corresponding geographic group. 

    The rate adjustment shall be reduced by the applicable 
 phase-in percentage as provided under subdivision 2h. 

    (i) For the cost report year ending September 30, 1996, and 
 for all subsequent reporting years, certified nursing facilities 
 must identify, differentiate, and record resident day statistics 
 for residents in case mix classification A who, on or after July 
 1, 1996, meet the modified level of care criteria in section 
 144.0721.  The resident day statistics shall be separated into 
 case mix classification A-1 for any resident day meeting the 
 high-function class A level of care criteria and case mix 
 classification A-2 for other case mix class A resident days. 

    Subd. 2c.    Operating costs after July 1, 1986.  For 
 rate years beginning on or after July 1, 1986, the commissioner 
 may allow a one time adjustment to historical operating costs of 
 a nursing facility that has been found by the commissioner of 
 health to be significantly below care related minimum standards 
 appropriate to the mix of resident needs in that nursing 
 facility when it is determined by the commissioners of health 
 and human services that the nursing facility is unable to meet 
 minimum standards through reallocation of nursing facility costs 
 and efficiency incentives or allowances.  In developing 
 procedures to allow adjustments, the commissioner shall specify 
 the terms and conditions governing any additional payments made 
 to a nursing facility as a result of the adjustment.  The 
 commissioner shall establish procedures to recover amounts paid 
 under this subdivision, in whole or in part, and to adjust 
 current and future rates, for nursing facilities that fail to 
 use the adjustment to satisfy care related minimum standards.  

    Subd. 2d.  If an annual cost report or field audit 
 indicates that expenditures for direct resident care have been 
 reduced in amounts large enough to indicate a possible 
 detrimental effect on the quality of care, the commissioner 
 shall notify the commissioner of health and the interagency 
 long-term care planning committee.  If a field audit reveals 
 that unallowable expenditures have been included in the nursing 
 facility's historical operating costs, the commissioner shall 
 disallow the expenditures and recover the entire overpayment. 
 The commissioner shall establish, by rule, procedures for 
 assessing an interest charge at the rate determined for unpaid 
 taxes or penalties under section 270.75 on any outstanding 
 balance resulting from an overpayment or underpayment. 

    Subd. 2e.    Contracts for services for ventilator 
 dependent persons.  The commissioner may contract with a 
 nursing facility eligible to receive medical assistance payments 
 to provide services to a ventilator dependent person identified 
 by the commissioner according to criteria developed by the 
 commissioner, including:  

    (1) nursing facility care has been recommended for the 
 person by a preadmission screening team; 

    (2) the person has been assessed at case mix classification 
 K; 

    (3) the person has been hospitalized for at least six 
 months and no longer requires inpatient acute care hospital 
 services; and 

    (4) the commissioner has determined that necessary services 
 for the person cannot be provided under existing nursing 
 facility rates.  

    The commissioner may issue a request for proposals to 
 provide services to a ventilator dependent person to nursing 
 facilities eligible to receive medical assistance payments and 
 shall select nursing facilities from among respondents according 
 to criteria developed by the commissioner, including:  

    (1) the cost-effectiveness and appropriateness of services; 

    (2) the nursing facility's compliance with federal and 
 state licensing and certification standards; and 

    (3) the proximity of the nursing facility to a 
 ventilator-dependent person identified by the commissioner who 
 requires nursing facility placement.  

    The commissioner may negotiate an adjustment to the 
 operating cost payment rate for a nursing facility selected by 
 the commissioner from among respondents to the request for 
 proposals.  The negotiated adjustment must reflect only the 
 actual additional cost of meeting the specialized care needs of 
 a ventilator-dependent person identified by the commissioner for 
 whom necessary services cannot be provided under existing 
 nursing facility rates and which are not otherwise covered under 
 Minnesota Rules, parts 9549.0010 to 9549.0080 or 9505.0170 to 
 9505.0475.  The negotiated payment rate must not exceed 200 
 percent of the highest multiple bedroom payment rate for a 
 Minnesota nursing facility, as initially established by the 
 commissioner for the rate year for case mix classification K.  
 The negotiated adjustment shall not affect the payment rate 
 charged to private paying residents under the provisions of 
 section 256B.48, subdivision 1.  

    Subd. 2f.    Exclusion.  Until procedures for 
 determining operating cost payment rates according to mix of 
 resident needs are established, nursing facilities licensed on 
 June 1, 1983 by the commissioner to provide residential services 
 for the physically handicapped and nursing facilities that have 
 an average length of stay of less than 180 days shall not be 
 included in the calculation of the 60th percentile of any 
 group.  For rate year beginning July 1, 1983 and July 1, 1984, 
 each of these nursing facilities shall receive their actual 
 allowed historical operating cost per diem increased by six 
 percent.  The commissioner shall also apply to these nursing 
 facilities the percentage limitation on the general and 
 administrative cost category as provided in subdivision 2.  

    Subd. 2g.    Required consultants.  Costs considered 
 general and administrative costs under section 256B.421 must be 
 included in general and administrative costs in total, without 
 direct or indirect allocation to other cost categories.  In a 
 nursing facility of 60 or fewer beds, part of an administrator's 
 salary may be allocated to other cost categories to the extent 
 justified in records kept by the nursing facility.  Central or 
 home office costs representing services of required consultants 
 in areas including, but not limited to, dietary, pharmacy, 
 social services, or activities may be allocated to the 
 appropriate department, but only if those costs are directly 
 identified by the nursing facility.  Central, affiliated, or 
 corporate office costs representing services of consultants not 
 required by law in the areas of nursing, quality assurance, 
 medical records, dietary, other care related services, and plant 
 operations may be allocated to the appropriate operating cost 
 category of a nursing facility according to paragraphs (a) to 
 (e).  

    (a) Only the salaries, fringe benefits, and payroll taxes 
 associated with the individual performing the service may be 
 allocated.  No other costs may be allocated. 

    (b) The allocation must be based on direct identification 
 and only to the extent justified in time distribution records 
 that show the actual time spent by the consultant performing the 
 services in the nursing facility.  

    (c) The cost in paragraph (a) for each consultant must not 
 be allocated to more than one operating cost category in the 
 nursing facility.  If more than one nursing facility is served 
 by a consultant, all nursing facilities shall allocate the 
 consultant's cost to the same operating category. 

    (d) Top management personnel must not be considered 
 consultants. 

    (e) The consultant's full-time responsibilities shall be to 
 provide the services identified in this item. 

    Subd. 2h.    Phase-in.  The commissioner shall allow 
 each nursing facility whose actual allowable historical 
 operating cost per diem for the reporting year ending September 
 30, 1984, and the following two reporting years is five percent 
 or more above the limits established by the commissioner, to be 
 reimbursed for part of the excess costs each year for up to 
 three rate years according to the formula in this subdivision.  
 The commissioner shall reimburse the nursing facility:  

    (1) for the rate year beginning July 1, 1985, 70 percent of 
 the difference between the actual allowable historical operating 
 cost per diem and 105 percent of the limit established by the 
 commissioner; 

    (2) for the rate year beginning July 1, 1986, 50 percent of 
 the difference between the actual allowable historical operating 
 cost per diem and 105 percent of the limit established by the 
 commissioner; and 

    (3) for the rate year beginning July 1, 1987, 30 percent of 
 the difference between the actual allowable historical operating 
 cost per diem and 105 percent of the limit established by the 
 commissioner. 

    Any efficiency incentive amount earned by the nursing 
 facility must be subtracted from any of the reimbursement 
 phase-in amounts computed under this section. 

    Subd. 2i.    Operating costs after July 1, 1988.  (a)  
   Other operating cost limits.  For the rate year beginning 
 July 1, 1988, the commissioner shall increase the other 
 operating cost limits established in Minnesota Rules, part 
 9549.0055, subpart 2, item E, to 110 percent of the median of 
 the array of allowable historical other operating cost per diems 
 and index these limits as in Minnesota Rules, part 9549.0056, 
 subparts 3 and 4.  The limits must be established in accordance 
 with subdivision 2b, paragraph (d).  For rate years beginning on 
 or after July 1, 1989, the adjusted other operating cost limits 
 must be indexed as in Minnesota Rules, part 9549.0056, subparts 
 3 and 4.  For the rate period beginning October 1, 1992, and for 
 rate years beginning after June 30, 1993, the amount of the 
 surcharge under section 256.9657, subdivision 1, shall be 
 included in the plant operations and maintenance operating cost 
 category.  The surcharge shall be an allowable cost for the 
 purpose of establishing the payment rate. 

    (b)    Care-related operating cost limits.  For the rate 
 year beginning July 1, 1988, the commissioner shall increase the 
 care-related operating cost limits established in Minnesota 
 Rules, part 9549.0055, subpart 2, items A and B, to 125 percent 
 of the median of the array of the allowable historical case mix 
 operating cost standardized per diems and the allowable 
 historical other care-related operating cost per diems and index 
 those limits as in Minnesota Rules, part 9549.0056, subparts 1 
 and 2.  The limits must be established in accordance with 
 subdivision 2b, paragraph (d).  For rate years beginning on or 
 after July 1, 1989, the adjusted care-related limits must be 
 indexed as in Minnesota Rules, part 9549.0056, subparts 1 and 2. 

    (c)    Salary adjustment per diem.  For the rate period 
 October 1, 1988, to June 30, 1990, the commissioner shall add 
 the appropriate salary adjustment per diem calculated in clause 
 (1) or (2) to the total operating cost payment rate of each 
 nursing facility.  The salary adjustment per diem for each 
 nursing facility must be determined as follows:  

    (1) for each nursing facility that reports salaries for 
 registered nurses, licensed practical nurses, and aides, 
 orderlies and attendants separately, the commissioner shall 
 determine the salary adjustment per diem by multiplying the 
 total salaries, payroll taxes, and fringe benefits allowed in 
 each operating cost category, except management fees and 
 administrator and central office salaries and the related 
 payroll taxes and fringe benefits, by 3.5 percent and then 
 dividing the resulting amount by the nursing facility's actual 
 resident days; and 

    (2) for each nursing facility that does not report salaries 
 for registered nurses, licensed practical nurses, aides, 
 orderlies, and attendants separately, the salary adjustment per 
 diem is the weighted average salary adjustment per diem increase 
 determined under clause (1). 

    Each nursing facility that receives a salary adjustment per 
 diem pursuant to this subdivision shall adjust nursing facility 
 employee salaries by a minimum of the amount determined in 
 clause (1) or (2).  The commissioner shall review allowable 
 salary costs, including payroll taxes and fringe benefits, for 
 the reporting year ending September 30, 1989, to determine 
 whether or not each nursing facility complied with this 
 requirement.  The commissioner shall report the extent to which 
 each nursing facility complied with the legislative commission 
 on long-term care by August 1, 1990.  

    (d)    New base year.  The commissioner shall establish 
 new base years for both the reporting year ending September 30, 
 1989, and the reporting year ending September 30, 1990.  In 
 establishing new base years, the commissioner must take into 
 account:  

    (1) statutory changes made in geographic groups; 

    (2) redefinitions of cost categories; and 

    (3) reclassification, pass-through, or exemption of certain 
 costs such as public employee retirement act contributions. 

    (e)    New base year.  The commissioner shall establish 
 a new base year for the reporting years ending September 30, 
 1991, and September 30, 1992.  In establishing a new base year, 
 the commissioner must take into account:  

    (1) statutory changes made in geographic groups; 

    (2) redefinitions of cost categories; and 

    (3) reclassification, pass-through, or exemption of certain 
 costs. 

    Subd. 2j.    Hospital-attached nursing facility status.  
 (a) For the purpose of setting rates under Minnesota Rules, 
 parts 9549.0010 to 9549.0080, for rate years beginning after 
 June 30, 1989, a hospital-attached nursing facility means a 
 nursing facility which meets the requirements of clauses (1) to 
 (3): 

    (1) the nursing facility is recognized by the federal 
 Medicare program to be a hospital-based nursing facility for 
 purposes of being subject to higher cost limits accorded 
 hospital-based nursing facilities under the Medicare program, 
 or, prior to June 30, 1983, was classified as a 
 hospital-attached nursing facility under Minnesota Rules, parts 
 9510.0010 to 9510.0480; 

    (2) the nursing facility's cost report filed under 
 Minnesota Rules, parts 9549.0010 to 9549.0080, shall use the 
 same cost allocation principles and methods used in the reports 
 filed for the Medicare program except as provided in clause (3); 
 and 

    (3) direct identification of costs to the nursing facility 
 cost center will be permitted only when the comparable hospital 
 costs have also been directly identified to a cost center which 
 is not allocated to the nursing facility.  

    (b) For rate years beginning after June 30, 1989, a nursing 
 facility and hospital, which have applied for hospital-based 
 nursing facility status under the federal Medicare program 
 during the reporting year or the nine-month period following the 
 nursing facility's reporting year, shall be considered a 
 hospital-attached nursing facility for purposes of setting 
 payment rates under Minnesota Rules, parts 9549.0010 to 
 9549.0080, for the rate year following the reporting year or the 
 nine-month period in which the facility made its Medicare 
 application.  The nursing facility must file its cost report or 
 an amended cost report for that reporting year before the 
 following rate year using Medicare principles and Medicare's 
 recommended cost allocation methods had the Medicare program's 
 hospital-based nursing facility status been granted to the 
 nursing facility.  For each subsequent rate year, the nursing 
 facility must meet the definition requirements in paragraph 
 (a).  If the nursing facility is denied hospital-based nursing 
 facility status under the Medicare program, the nursing 
 facility's payment rates for the rate years the nursing facility 
 was considered to be a hospital-attached nursing facility 
 pursuant to this paragraph shall be recalculated treating the 
 nursing facility as a non-hospital-attached nursing facility. 

    (c) For rate years beginning on or after July 1, 1995, a 
 nursing facility shall be considered a hospital attached nursing 
 facility for purposes of setting payment rates under Minnesota 
 Rules, parts 9549.0010 to 9549.0080 and this section if it meets 
 the requirements of paragraphs (a) and (b), and 

    (1) the hospital and nursing facility are physically 
 attached or connected by a tunnel or skyway; or 

    (2) the nursing facility was recognized by the Medicare 
 program as hospital attached as of January 1, 1995, and this 
 status has been maintained continuously. 

    Subd. 2k.    Operating costs after July 1, 1989.  For 
 rate years beginning on or after July 1, 1989, a nursing 
 facility that is exempt under subdivision 2b, paragraph (d), 
 clause (2); whose total number of licensed beds are licensed 
 under Minnesota Rules, parts 9570.2000 to 9570.3600; and that 
 maintains an average length of stay of less than 365 days during 
 each reporting year, is limited to 140 percent of the 
 other-operating-cost limit for hospital-attached nursing 
 facilities as established by Minnesota Rules, part 9549.0055, 
 subpart 2, item E, subitem (2), as modified by subdivision 2i, 
 paragraph (a).  For purposes of this subdivision, the nursing 
 facility's average length of stay must be computed by dividing 
 the nursing facility's actual resident days for the reporting 
 year by the nursing facility's total discharges for that 
 reporting year.  

    Subd. 2l.    Inflation adjustments after July 1, 1990.  
 (a) For rate years beginning on or after July 1, 1990, the 
 forecasted composite price index for a nursing facility's 
 allowable operating cost per diems shall be determined using 
 Data Resources, Inc., forecast for change in the Nursing Home 
 Market Basket.  The commissioner of human services shall use the 
 indices as forecasted by Data Resources, Inc., in the fourth 
 quarter of the calendar year preceding the rate year. 

    (b) For rate years beginning on or after July 1, 1992, the 
 commissioner shall index the prior year's operating cost limits 
 by the percentage change in the Data Resources, Inc., Nursing 
 Home Market Basket between the midpoint of the current reporting 
 year and the midpoint of the previous reporting year.  The 
 commissioner shall use the indices as forecasted by Data 
 Resources, Inc., in the fourth quarter of the calendar year 
 preceding the rate year.  

    (c) For rate years beginning on or after July 1, 1993, the 
 commissioner shall not provide automatic annual inflation 
 adjustments for nursing facilities.  The commissioner of finance 
 shall include annual adjustments in operating costs for nursing 
 facilities as a budget change request in each biennial detailed 
 expenditure budget submitted to the legislature under section 
 16A.11.  

    Subd. 2m.    Nursing facilities specializing in the 
 treatment of Huntington's disease.  For the rate year 
 beginning July 1, 1991, and for the rate period from July 1, 
 1992, to December 31, 1992, the commissioner shall reimburse 
 nursing facilities that specialize in the treatment of 
 Huntington's disease using the case mix per diem limit that 
 applies to nursing facilities licensed under the department of 
 human services' rules governing residential services for 
 physically handicapped persons to establish rates for up to 35 
 persons with Huntington's disease.  For purposes of this 
 subdivision, a nursing facility specializes in the treatment of 
 Huntington's disease if more than 25 percent of its licensed 
 capacity is used for residents with Huntington's disease. 

    Subd. 2n.    Efficiency incentive reductions for 
 substandard care.  For rate years beginning on or after July 
 1, 1991, the efficiency incentive established under subdivision 
 2b, paragraph (d), shall be reduced or eliminated for nursing 
 facilities determined by the commissioner of health under 
 section 144A.10, subdivision 4, to have uncorrected or repeated 
 violations which create a risk to resident care, safety, or 
 rights, except for uncorrected or repeated violations relating 
 to a facility's physical plant.  Upon being notified by the 
 commissioner of health of uncorrected or repeated violations, 
 the commissioner of human services shall require the nursing 
 facility to use efficiency incentive payments to correct the 
 violations.  The commissioner of human services shall require 
 the nursing facility to forfeit efficiency incentive payments 
 for failure to correct the violations.  Any forfeiture shall be 
 limited to the amount necessary to correct the violation.  

    Subd. 2o.    Special payment rates for short-stay nursing 
 facilities.  Notwithstanding contrary provisions of this 
 section and rules adopted by the commissioner, for the rate 
 years beginning on or after July 1, 1993, a nursing facility 
 whose average length of stay for the preceding reporting year is 
 (1) less than 180 days; or (2) less than 225 days in a nursing 
 facility with more than 315 licensed beds must be reimbursed for 
 allowable costs up to 125 percent of the total care-related 
 limit and 105 percent of the other-operating-cost limit for 
 hospital-attached nursing facilities.  A nursing facility that 
 received the benefit of this limit during the rate year 
 beginning July 1, 1992, continues to receive this rate during 
 the rate year beginning July 1, 1993, even if the facility's 
 average length of stay is more than 180 days in the rate years 
 subsequent to the rate year beginning July 1, 1991.  For 
 purposes of this subdivision, a nursing facility shall compute 
 its average length of stay by dividing the nursing facility's 
 actual resident days for the reporting year by the nursing 
 facility's total resident discharges for that reporting year. 

    Subd. 2p.    Downsizing of nursing facilities that are 
 institutions for mental disease.  (a) The provisions of this 
 subdivision apply to a nursing facility that is an institution 
 for mental disease and that has less than 23 licensed beds.  A 
 nursing facility that meets these conditions may reduce its 
 total number of licensed beds to 16 licensed beds by July 1, 
 1992, by notifying the commissioner of health of the reduction 
 by April 1, 1992.  If the nursing facility elects to reduce its 
 licensed beds to 16, the commissioner of health shall approve 
 that request effective on the date of request.  

    (b) The commissioner of human services must be notified by 
 the nursing facility of the reduction in licensed beds by April 
 4, 1992, and that notice must include a copy of the request for 
 reduction submitted to the commissioner of health. 

    (c) For the rate year beginning July 1, 1992, the 
 commissioner shall establish the operating cost payment rates 
 for a nursing facility that has reduced its licensed bed 
 capacity under this subdivision by taking into account 
 paragraphs (1) and (2).  

    (1) The commissioner must reduce the nursing facility's 
 nurse's aide, orderly, and attendant salaries account and the 
 food expense account for the reporting year ending September 30, 
 1991, by 50 percent of the percentage change in licensed beds.  

    (2) The commissioner shall adjust the nursing facility's 
 resident days and standardized resident days for the reporting 
 year ending September 30, 1991, as in clauses (i) and (ii).  

    (i) Resident days shall be the lesser of the nursing 
 facility's actual resident days for that reporting year or 5,840.

    (ii) Standardized resident days shall be the lesser of the 
 nursing facility's actual standardized resident days or the 
 nursing facility's case mix score for that reporting year times 
 5,840.  

    (d) For the rate year beginning July 1, 1993, the 
 commissioner shall establish the operating cost payment rates 
 for a nursing facility that has reduced its licensed bed 
 capacity under this subdivision by taking into account 
 paragraphs (1) and (2). 

    (1) The commissioner must reduce the nursing facility's 
 account for the nurse's aide, orderly, and attendant salaries, 
 and its account for food expense for the reporting year ending 
 September 30, 1992, by 37.5 percent of the percentage change in 
 licensed beds.  

    (2) The commissioner shall adjust the nursing facility's 
 resident days and standardized resident days for the reporting 
 year ending September 30, 1992, as in clauses (i) and (ii).  

    (i) Resident days shall be the lesser of the nursing 
 facility's actual resident days for that reporting year or 5,840.

    (ii) Standardized resident days shall be the lesser of the 
 nursing facility's actual standardized resident days or the 
 nursing facility's case mix score for that reporting year times 
 5,840.  

    (e) If a nursing facility reduces its total number of 
 licensed beds before June 28, 1991, by notifying the 
 commissioner of health by that date, the dates and computations 
 in this subdivision shall be accelerated by one year. 

    (f) A nursing facility eligible under this subdivision may 
 use the notification date and the date on which the licensed 
 beds are reduced for purposes of applying the provisions in 
 subdivision 3a, paragraph (d), clause (2).  

    Subd. 2q.    Negotiated rate cap exemption.  A nursing 
 facility which requests, after January 1991, that its boarding 
 care beds be decertified from participation in the medical 
 assistance program, is not eligible for the exception to the 
 negotiated rate cap in section 256I.05, subdivision 2, paragraph 
 (c), clause (1). 

    Subd. 2r.    Payment restrictions on leave days.  
 Effective July 1, 1993, the commissioner shall limit payment for 
 leave days in a nursing facility to 79 percent of that nursing 
 facility's total payment rate for the involved resident. 

    Subd. 3.    Property-related costs, 1983-1985.  (a) For 
 rate years beginning July 1, 1983 and July 1, 1984, 
 property-related costs shall be reimbursed to each nursing 
 facility at the level recognized in the most recent cost report 
 received by December 31, 1982, and audited by March 1, 1983, and 
 may be subsequently adjusted to reflect the costs recognized in 
 the final rate for that cost report, adjusted for rate 
 limitations in effect before May 23, 1983.  Effective for rate 
 years beginning on or after July 1, 1988, a rate limitation 
 ratio that is based on historical limitations resulting from the 
 application of the regional maximum rate, private-pay rate, or 
 ten percent cap on rate increases, must not be less than .90.  
 Property-related costs include:  depreciation, interest, 
 earnings or investment allowance, lease, or rental payments.  No 
 adjustments shall be made as a result of sales or 
 reorganizations of provider entities.  

    (b) Adjustments for the cost of repairs, replacements, 
 renewals, betterments, or improvements to existing buildings, 
 and building service equipment shall be allowed if:  

    (1) the cost incurred is reasonable, necessary, and 
 ordinary; 

    (2) the net cost is greater than $5,000.  "Net cost" means 
 the actual cost, minus proceeds from insurance, salvage, or 
 disposal; 

    (3) the nursing facility's property-related costs per diem 
 is equal to or less than the average property-related costs per 
 diem within its group; and 

    (4) the adjustment is shown in depreciation schedules 
 submitted to and approved by the commissioner.  

    (c) Annual per diem shall be computed by dividing total 
 property-related costs by 96 percent of the nursing facility's 
 licensed capacity days for nursing facilities with more than 60 
 beds and 94 percent of the nursing facility's licensed capacity 
 days for nursing facilities with 60 or fewer beds.  For a 
 nursing facility whose residents' average length of stay is 180 
 days or less, the commissioner may waive the 96 or 94 percent 
 factor and divide the nursing facility's property-related costs 
 by the actual resident days to compute the nursing facility's 
 annual property-related per diem.  The commissioner shall 
 promulgate emergency and permanent rules to recapture excess 
 depreciation upon sale of a nursing facility.  

    Subd. 3a.    Property-related costs after July 1, 1985.  
 (a) For rate years beginning on or after July 1, 1985, the 
 commissioner, by permanent rule, shall reimburse nursing 
 facility providers that are vendors in the medical assistance 
 program for the rental use of real estate and depreciable 
 equipment.  "Real estate" means land improvements, buildings, 
 and attached fixtures used directly for resident care.  
 "Depreciable equipment" means the standard movable resident care 
 equipment and support service equipment generally used in 
 long-term care facilities.  

    (b) In developing the method for determining payment rates 
 for the rental use of nursing facilities, the commissioner shall 
 consider factors designed to:  

    (1) simplify the administrative procedures for determining 
 payment rates for property-related costs; 

    (2) minimize discretionary or appealable decisions; 

    (3) eliminate any incentives to sell nursing facilities; 

    (4) recognize legitimate costs of preserving and replacing 
 property; 

    (5) recognize the existing costs of outstanding 
 indebtedness allowable under the statutes and rules in effect on 
 May 1, 1983; 

    (6) address the current value of, if used directly for 
 patient care, land improvements, buildings, attached fixtures, 
 and equipment; 

    (7) establish an investment per bed limitation; 

    (8) reward efficient management of capital assets; 

    (9) provide equitable treatment of facilities; 

    (10) consider a variable rate; and 

    (11) phase-in implementation of the rental reimbursement 
 method.  

    (c) No later than January 1, 1984, the commissioner shall 
 report to the legislature on any further action necessary or 
 desirable in order to implement the purposes and provisions of 
 this subdivision.  

    (d) For rate years beginning on or after July 1, 1987, a 
 nursing facility which has reduced licensed bed capacity after 
 January 1, 1986, shall be allowed to: 

    (1) aggregate the applicable investment per bed limits 
 based on the number of beds licensed prior to the reduction; and 

    (2) establish capacity days for each rate year following 
 the licensure reduction based on the number of beds licensed on 
 the previous April 1 if the commissioner is notified of the 
 change by April 4.  The notification must include a copy of the 
 delicensure request that has been submitted to the commissioner 
 of health. 

    (e) Until the rental reimbursement method is fully phased 
 in, a nursing facility whose final property-related payment rate 
 is the rental rate shall continue to have its property-related 
 payment rates established based on the rental reimbursement 
 method. 

    (f) For rate years beginning on or after July 1, 1989, the 
 interest expense that results from a refinancing of a nursing 
 facility's demand call loan, when the loan that must be 
 refinanced was incurred before May 22, 1983, is an allowable 
 interest expense if: 

    (1) the demand call loan or any part of it was in the form 
 of a loan that was callable at the demand of the lender; 

    (2) the demand call loan or any part of it was called by 
 the lender through no fault of the nursing facility; 

    (3) the demand call loan or any part of it was made by a 
 government agency operating under a statutory or regulatory loan 
 program; 

    (4) the refinanced debt does not exceed the sum of the 
 allowable remaining balance of the demand call loan at the time 
 of payment on the demand call loan and refinancing costs; 

    (5) the term of the refinanced debt does not exceed the 
 remaining term of the demand call loan, had the debt not been 
 subject to an on-call payment demand; and 

    (6) the refinanced debt is not a debt between related 
 organizations as defined in Minnesota Rules, part 9549.0020, 
 subpart 38. 

    Subd. 3b.    Depreciation recapture.  The sale of a 
 nursing facility which occurred on or after July 1, 1987, shall 
 result in depreciation recapture payments to be paid by the 
 buyer to the commissioner within 60 days of the department's 
 notification if the sale price exceeds the nursing facility's 
 allowable historical cost of capital assets including land 
 recognized by the commissioner at the time of the sale reduced 
 by accumulated depreciation.  The gross recapture amount shall 
 be the lesser of the actual gain on the sale or actual 
 depreciation recognized for the purpose of calculating medical 
 assistance payment rates from the latter of the date of previous 
 sale or November 1, 1972, through the date of the sale.  The 
 gross recapture amount shall be allocated to each reporting year 
 from the latter of the date of previous sale or November 1, 
 1972, through the date of the sale in the same ratio as 
 depreciation amounts recognized for the purpose of calculating 
 medical assistance payment rates.  The amount allocated to each 
 reporting year shall be divided by the total actual resident 
 days in that reporting year, thereby determining a 
 cost-per-resident day.  The recapture amount shall be the 
 cost-per-resident day for each reporting year times the actual 
 medical assistance resident days for the corresponding rate year 
 following each reporting year.  No payment of depreciation 
 recapture shall be assessed with respect to a portion of a rate 
 year beginning after June 30, 1985, in which the 
 property-related payment rate was based on the nursing 
 facility's rental value.  The recapture amount shall be reduced 
 by one percent for each month of continuous ownership since the 
 previous date of sale of the nursing facility up to a maximum of 
 100 months.  For the purpose of this subdivision, the sale of a 
 nursing facility means the sale or transfer of a nursing 
 facility's capital assets or capital stock or the redemption of 
 ownership interests by members of a partnership.  In the case of 
 a sale or transfer of a nursing facility in which the new 
 operator leases depreciable equipment used in the nursing 
 facility business from the prior operator, or an affiliate of 
 the prior operator, the net present value of the lease shall be 
 added to the transaction price for the purpose of determining 
 the actual gain on the sale.  In the case of a partial sale of a 
 nursing facility, the provisions of this subdivision will be 
 applied proportionately to sales or accumulations of sales that 
 exceed 20 percent of a nursing facility's capital assets or 
 capital stock.  Depreciation recapture payments resulting from 
 the sale of a nursing facility which occurred before July 1, 
 1985, shall be calculated in accordance with reimbursement 
 regulations in effect on the date of the sale. 

    Subd. 3c.    Plant and maintenance costs.  For the rate 
 years beginning on or after July 1, 1987, the commissioner shall 
 allow as an expense in the reporting year of occurrence the 
 lesser of the actual allowable plant and maintenance costs for 
 supplies, minor equipment, equipment repairs, building repairs, 
 purchased services and service contracts, except for arms-length 
 service contracts whose primary purpose is supervision, or $325 
 per licensed bed. 

    Subd. 3d.    Betterments and additions.  Notwithstanding 
 any contrary provision of this chapter, or a rule adopted under 
 this chapter, a nursing facility that commenced construction on 
 a betterment and addition costing $700,000 or more prior to the 
 expiration of Minnesota Rules, 12 MCAR 2.05001 to 2.05016 
 (Temporary)(1983) shall have its property-related payment rate 
 step-up as a result of the betterment and addition calculated as 
 set forth in 12 MCAR 2.05011.B.3 in the case of betterments, and 
 12 MCAR 2.05011.D in the case of additions.  For purposes of 
 this subdivision, the terms "betterment" and "addition" have the 
 meaning set forth in 12 MCAR 2.05002 and the term "commenced 
 construction" has the meaning set forth in section 144A.071, 
 subdivision 3. 

    Subd. 3e.    Hospital-attached convalescent and nursing 
 care facilities.  If a nonprofit or community-operated 
 hospital and attached convalescent and nursing care facility 
 suspend operation of the hospital, the surviving nursing care 
 facility must be allowed to continue its status as a 
 hospital-attached convalescent and nursing care facility for 
 reimbursement purposes in five subsequent rate years.  In the 
 fourth year the facility shall receive 60 percent of the 
 difference between the hospital-attached limit and the 
 freestanding nursing facility limit, and in the fifth year the 
 facility shall receive 30 percent of the difference.  

    Subd. 3f.    Property costs after July 1, 1988.  (a)    
 Investment per bed limit.  For the rate year beginning July 1, 
 1988, the replacement-cost-new per bed limit must be $32,571 per 
 licensed bed in multiple bedrooms and $48,857 per licensed bed 
 in a single bedroom.  For the rate year beginning July 1, 1989, 
 the replacement-cost-new per bed limit for a single bedroom must 
 be $49,907 adjusted according to Minnesota Rules, part 
 9549.0060, subpart 4, item A, subitem (1).  Beginning January 1, 
 1990, the replacement-cost-new per bed limits must be adjusted 
 annually as specified in Minnesota Rules, part 9549.0060, 
 subpart 4, item A, subitem (1).  Beginning January 1, 1991, the 
 replacement-cost-new per bed limits will be adjusted annually as 
 specified in Minnesota Rules, part 9549.0060, subpart 4, item A, 
 subitem (1), except that the index utilized will be the Bureau 
 of the Census:  Composite fixed-weighted price index as 
 published in the C30 Report, Value of New Construction Put in 
 Place. 

    (b)    Rental factor.  For the rate year beginning July 
 1, 1988, the commissioner shall increase the rental factor as 
 established in Minnesota Rules, part 9549.0060, subpart 8, item 
 A, by 6.2 percent rounded to the nearest 100th percent for the 
 purpose of reimbursing nursing facilities for soft costs and 
 entrepreneurial profits not included in the cost valuation 
 services used by the state's contracted appraisers.  For rate 
 years beginning on or after July 1, 1989, the rental factor is 
 the amount determined under this paragraph for the rate year 
 beginning July 1, 1988. 

    (c)    Occupancy factor.  For rate years beginning on or 
 after July 1, 1988, in order to determine property-related 
 payment rates under Minnesota Rules, part 9549.0060, for all 
 nursing facilities except those whose average length of stay in 
 a skilled level of care within a nursing facility is 180 days or 
 less, the commissioner shall use 95 percent of capacity days.  
 For a nursing facility whose average length of stay in a skilled 
 level of care within a nursing facility is 180 days or less, the 
 commissioner shall use the greater of resident days or 80 
 percent of capacity days but in no event shall the divisor 
 exceed 95 percent of capacity days. 

    (d)    Equipment allowance.  For rate years beginning on 
 July 1, 1988, and July 1, 1989, the commissioner shall add ten 
 cents per resident per day to each nursing facility's 
 property-related payment rate.  The ten-cent property-related 
 payment rate increase is not cumulative from rate year to rate 
 year.  For the rate year beginning July 1, 1990, the 
 commissioner shall increase each nursing facility's equipment 
 allowance as established in Minnesota Rules, part 9549.0060, 
 subpart 10, by ten cents per resident per day.  For rate years 
 beginning on or after July 1, 1991, the adjusted equipment 
 allowance must be adjusted annually for inflation as in 
 Minnesota Rules, part 9549.0060, subpart 10, item E.  For the 
 rate period beginning October 1, 1992, the equipment allowance 
 for each nursing facility shall be increased by 28 percent.  For 
 rate years beginning after June 30, 1993, the allowance must be 
 adjusted annually for inflation. 

    (e)    Post chapter 199 related-organization debts and 
 interest expense.  For rate years beginning on or after July 
 1, 1990, Minnesota Rules, part 9549.0060, subpart 5, item E, 
 shall not apply to outstanding related organization debt 
 incurred prior to May 23, 1983, provided that the debt was an 
 allowable debt under Minnesota Rules, parts 9510.0010 to 
 9510.0480, the debt is subject to repayment through annual 
 principal payments, and the nursing facility demonstrates to the 
 commissioner's satisfaction that the interest rate on the debt 
 was less than market interest rates for similar arms-length 
 transactions at the time the debt was incurred.  If the debt was 
 incurred due to a sale between family members, the nursing 
 facility must also demonstrate that the seller no longer 
 participates in the management or operation of the nursing 
 facility.  Debts meeting the conditions of this paragraph are 
 subject to all other provisions of Minnesota Rules, parts 
 9549.0010 to 9549.0080. 

    (f)    Building capital allowance for nursing facilities 
 with operating leases.  For rate years beginning on or after 
 July 1, 1990, a nursing facility with operating lease costs 
 incurred for the nursing facility's buildings shall receive its 
 building capital allowance computed in accordance with Minnesota 
 Rules, part 9549.0060, subpart 8.  

    Subd. 3g.    Property costs after July 1, 1990, for 
 certain facilities.  (a) For rate years beginning on or after 
 July 1, 1990, nursing facilities that, on or after January 1, 
 1976, but prior to January 1, 1987, were newly licensed after 
 new construction, or increased their licensed beds by a minimum 
 of 35 percent through new construction, and whose building 
 capital allowance is less than their allowable annual principal 
 and interest on allowable debt prior to the application of the 
 replacement-cost-new per bed limit and whose remaining weighted 
 average debt amortization schedule as of January 1, 1988, 
 exceeded 15 years, must receive a property-related payment rate 
 equal to the greater of their rental per diem or their annual 
 allowable principal and allowable interest without application 
 of the replacement-cost-new per bed limit, divided by their 
 capacity days as determined under Minnesota Rules, part 
 9549.0060, subpart 11, as modified by subdivision 3f, paragraph 
 (c), for the preceding reporting year, plus their equipment 
 allowance.  A nursing facility that is eligible for a 
 property-related payment rate under this subdivision and whose 
 property-related payment rate in a subsequent rate year is its 
 rental per diem must continue to have its property-related 
 payment rates established for all future rate years based on the 
 rental reimbursement method in Minnesota Rules, part 9549.0060.  

 The commissioner may require the nursing facility to apply for 
 refinancing as a condition of receiving special rate treatment 
 under this subdivision. 

    (b) If a nursing facility is eligible for a 
 property-related payment rate under this subdivision, and the 
 nursing facility's debt is refinanced after October 1, 1988, the 
 provisions in paragraphs (1) to (7) also apply to the 
 property-related payment rate for rate years beginning on or 
 after July 1, 1990. 

    (1) A nursing facility's refinancing must not include debts 
 with balloon payments. 

    (2) If the issuance costs, including issuance costs on the 
 debt refinanced, are financed as part of the refinancing, the 
 historical cost of capital assets limit in Minnesota Rules, part 
 9549.0060, subpart 5, item A, subitem (6), includes issuance 
 costs that do not exceed seven percent of the debt refinanced, 
 plus the related issuance costs.  For purposes of this 
 paragraph, issuance costs means the fees charged by the 
 underwriter, issuer, attorneys, bond raters, appraisers, and 
 trustees, and includes the cost of printing, title insurance, 
 registration tax, and a feasibility study for the refinancing of 
 a nursing facility's debt.  Issuance costs do not include bond 
 premiums or discounts when bonds are sold at other than their 
 par value, points, or a bond reserve fund.  To the extent 
 otherwise allowed under this paragraph, the straight-line 
 amortization of the refinancing issuance costs is not an 
 allowable cost. 

    (3) The annual principal and interest expense payments and 
 any required annual municipal fees on the nursing facility's 
 refinancing replace those of the refinanced debt and, together 
 with annual principal and interest payments on other allowable 
 debts, are allowable costs subject to the limitation on 
 historical cost of capital assets plus issuance costs as limited 
 in paragraph (2), if any. 

    (4) If the nursing facility's refinancing includes zero 
 coupon bonds, the commissioner shall establish a monthly debt 
 service payment schedule based on an annuity that will produce 
 an amount equal to the zero coupon bonds at maturity.  The term 
 and interest rate is the term and interest rate of the zero 
 coupon bonds.  Any refinancing to repay the zero coupon bonds is 
 not an allowable cost. 

    (5) The annual amount of annuity payments is added to the 
 nursing facility's allowable annual principal and interest 
 payment computed in paragraph (3). 

    (6) The property-related payment rate is equal to the 
 amount in paragraph (5), divided by the nursing facility's 
 capacity days as determined under Minnesota Rules, part 
 9549.0060, subpart 11, as modified by subdivision 3f, paragraph 
 (c), for the preceding reporting year plus an equipment 
 allowance. 

    (7) Except as provided in this subdivision, the provisions 
 of Minnesota Rules, part 9549.0060 apply. 

    Subd. 3h.    Special property rate.  Notwithstanding 
 contrary provisions of this chapter or rules adopted under it, 
 for rate years beginning July 1, 1990, a nursing facility under 
 lease from 1968 until 1983 with a lessee or related party having 
 an option to purchase the nursing facility, which option was 
 subsequently exercised, shall be allowed debt and interest costs 
 incurred by the lessee or related party on indebtedness created 
 when the option to purchase was exercised before the end of the 
 1983 calendar year.  The nursing facility must demonstrate to 
 the commissioner's satisfaction that the interest rate on the 
 debt was less than market interest rates for similar arms-length 
 transactions at the time the debt was incurred. 

    Subd. 3i.    Property costs for the rate year beginning 
 July 1, 1990.  Notwithstanding Minnesota Rules, part 
 9549.0060, subpart 13, item H, the commissioner shall determine 
 property-related payment rates for nursing facilities for the 
 rate year beginning July 1, 1990, as follows:  

    (a) The property-related payment rate for a nursing 
 facility that qualifies under subdivision 3g is the greater of 
 the rate determined under that subdivision or the rate 
 determined under paragraph (c), (d), or (e), whichever is 
 applicable. 

    (b) Nursing facilities shall be grouped according to the 
 type of property-related payment rate the commissioner 
 determined for the rate year beginning July 1, 1989.  A nursing 
 facility whose property-related payment rate was determined 
 under Minnesota Rules, part 9549.0060, subpart 13, item A (full 
 rental reimbursement), shall be considered group A.  A nursing 
 facility whose property-related payment rate was determined 
 under Minnesota Rules, part 9549.0060, subpart 13, item B 
 (phase-down to full rental reimbursement), shall be considered 
 group B.  A nursing facility whose property-related payment rate 
 was determined under Minnesota Rules, part 9549.0060, subpart 
 13, item C or D (phase-up to full rental reimbursement), shall 
 be considered group C. 

    (c) For the rate year beginning July 1, 1990, a group A 
 nursing facility shall receive its property-related payment rate 
 determined under Minnesota Rules, parts 9549.0010 to 9549.0080, 
 and this section. 

    (d) For the rate year beginning July 1, 1990, a Group B 
 nursing facility shall receive the greater of 87 percent of the 
 property-related payment rate in effect on July 1, 1989; or the 
 rental per diem rate determined under Minnesota Rules, parts 
 9549.0010 to 9549.0080, and this section in effect on July 1, 
 1990; or the sum of 100 percent of the nursing facility's 
 allowable principal and interest expense, plus its equipment 
 allowance multiplied by the resident days for the reporting year 
 ending September 30, 1989, divided by the nursing facility's 
 capacity days as determined under Minnesota Rules, part 
 9549.0060, subpart 11, as modified by subdivision 3f, paragraph 
 (c); except that the nursing facility's property-related payment 
 rate must not exceed its property-related payment rate in effect 
 on July 1, 1989. 

    (e) For the rate year beginning July 1, 1990, a group C 
 nursing facility shall receive its property-related payment rate 
 determined under Minnesota Rules, parts 9549.0010 to 9549.0080, 
 and this section, except the rate must not exceed the lesser of 
 its property-related payment rate determined for the rate year 
 beginning July 1, 1989, multiplied by 116 percent or its rental 
 per diem rate determined effective July 1, 1990. 

    (f) The property-related payment rate for a nursing 
 facility that qualifies for a rate adjustment under Minnesota 
 Rules, part 9549.0060, subpart 13, item G (special 
 reappraisals), shall have the property-related payment rate 
 determined in paragraphs (a) to (e) adjusted according to the 
 provisions in that rule. 

    (g) Except as provided in subdivision 4, paragraph (f), and 
 subdivision 11, a nursing facility that has a change in 
 ownership or a reorganization of provider entity is subject to 
 the provisions of Minnesota Rules, part 9549.0060, subpart 13, 
 item F. 

    Subd. 3j.    Property rate adjustment for required 
 improvements.  The commissioner shall add an adjustment to the 
 property-related payment rate of a certified, freestanding 
 boarding care home reflecting the costs incurred by that nursing 
 facility to install a communications system in every room and 
 hallway handrails, as required under the 1987 federal Omnibus 
 Budget Reconciliation Act, Public Law Number 100-203.  The 
 property-related payment rate increase is only available if, and 
 to the extent that, the nursing facility's existing 
 property-related payment rate, minus the nursing facility's 
 allowable principal and interest costs and equipment allowance, 
 is not sufficient to cover the costs of the required 
 improvements.  Each nursing facility eligible for the adjustment 
 shall submit to the commissioner a detailed estimate of the cost 
 increases the facility will incur to meet the new physical plant 
 requirements.  Ten percent of the amount of the costs that are 
 determined by the commissioner to be reasonable for the nursing 
 facility to meet the new requirements, divided by resident days, 
 must be added to the nursing facility's property-related payment 
 rate.  The adjustment shall be added to the property-related 
 payment rate determined under subdivision 3i.  The resulting 
 recalculated property-related payment rate is effective October 
 1, 1990, or 60 days after a nursing facility submits its 
 detailed cost estimate, whichever occurs later.  

    The adjustment is only available to a certified, 
 freestanding boarding care home that cannot meet the 
 requirements of Public Law Number 100-203 for communications 
 systems and handrails as demonstrated to the satisfaction of the 
 commissioner of health.  When the commissioner of human services 
 establishes that it is not cost-effective to upgrade an eligible 
 certified, freestanding boarding care home to the new standards, 
 the commissioner of human services may exclude the certified 
 freestanding boarding care home if it is either an institution 
 for mental disease or a certified, freestanding boarding care 
 home that would have been determined to be an institution for 
 mental disease but for the fact that it has 16 or fewer licensed 
 beds. 

    Subd. 4.    Special rates.  (a) For the rate years 
 beginning July 1, 1983, and July 1, 1984, a newly constructed 
 nursing facility or one with a capacity increase of 50 percent 
 or more may, upon written application to the commissioner, 
 receive an interim payment rate for reimbursement for 
 property-related costs calculated pursuant to the statutes and 
 rules in effect on May 1, 1983, and for operating costs 
 negotiated by the commissioner based upon the 60th percentile 
 established for the appropriate group under subdivision 2a, to 
 be effective from the first day a medical assistance recipient 
 resides in the facility or for the added beds.  For newly 
 constructed nursing facilities which are not included in the 
 calculation of the 60th percentile for any group, subdivision 
 2f, the commissioner shall establish by rule procedures for 
 determining interim operating cost payment rates and interim 
 property-related cost payment rates.  The interim payment rate 
 shall not be in effect for more than 17 months.  The 
 commissioner shall establish, by emergency and permanent rules, 
 procedures for determining the interim rate and for making a 
 retroactive cost settle-up after the first year of operation; 
 the cost settled operating cost per diem shall not exceed 110 
 percent of the 60th percentile established for the appropriate 
 group.  Until procedures determining operating cost payment 
 rates according to mix of resident needs are established, the 
 commissioner shall establish by rule procedures for determining 
 payment rates for nursing facilities which provide care under a 
 lesser care level than the level for which the nursing facility 
 is certified.  

    (b) For the rate years beginning on or after July 1, 1985, 
 a newly constructed nursing facility or one with a capacity 
 increase of 50 percent or more may, upon written application to 
 the commissioner, receive an interim payment rate for 
 reimbursement for property related costs, operating costs, and 
 real estate taxes and special assessments calculated under rules 
 promulgated by the commissioner. 

    (c) For rate years beginning on or after July 1, 1983, the 
 commissioner may exclude from a provision of 12 MCAR S 2.050 any 
 facility that is licensed by the commissioner of health only as 
 a boarding care home, certified by the commissioner of health as 
 an intermediate care facility, is licensed by the commissioner 
 of human services under Minnesota Rules, parts 9520.0500 to 
 9520.0690, and has less than five percent of its licensed 
 boarding care capacity reimbursed by the medical assistance 
 program.  Until a permanent rule to establish the payment rates 
 for facilities meeting these criteria is promulgated, the 
 commissioner shall establish the medical assistance payment rate 
 as follows:  

    (1) The desk audited payment rate in effect on June 30, 
 1983, remains in effect until the end of the facility's fiscal 
 year.  The commissioner shall not allow any amendments to the 
 cost report on which this desk audited payment rate is based.  

    (2) For each fiscal year beginning between July 1, 1983, 
 and June 30, 1985, the facility's payment rate shall be 
 established by increasing the desk audited operating cost 
 payment rate determined in clause (1) at an annual rate of five 
 percent.  

    (3) For fiscal years beginning on or after July 1, 1985, 
 but before January 1, 1988, the facility's payment rate shall be 
 established by increasing the facility's payment rate in the 
 facility's prior fiscal year by the increase indicated by the 
 consumer price index for Minneapolis and St. Paul.  

    (4) For the fiscal year beginning on January 1, 1988, the 
 facility's payment rate must be established using the following 
 method:  The commissioner shall divide the real estate taxes and 
 special assessments payable as stated in the facility's current 
 property tax statement by actual resident days to compute a real 
 estate tax and special assessment per diem.  Next, the prior 
 year's payment rate must be adjusted by the higher of (1) the 
 percentage change in the consumer price index (CPI-U U.S. city 
 average) as published by the Bureau of Labor Statistics between 
 the previous two Septembers, new series index (1967-100), or (2) 
 2.5 percent, to determine an adjusted payment rate.  The 
 facility's payment rate is the adjusted prior year's payment 
 rate plus the real estate tax and special assessment per diem. 

    (5) For fiscal years beginning on or after January 1, 1989, 
 the facility's payment rate must be established using the 
 following method:  The commissioner shall divide the real estate 
 taxes and special assessments payable as stated in the 
 facility's current property tax statement by actual resident 
 days to compute a real estate tax and special assessment per 
 diem.  Next, the prior year's payment rate less the real estate 
 tax and special assessment per diem must be adjusted by the 
 higher of (1) the percentage change in the consumer price index 
 (CPI-U U.S. city average) as published by the Bureau of Labor 
 Statistics between the previous two Septembers, new series index 
 (1967-100), or (2) 2.5 percent, to determine an adjusted payment 
 rate.  The facility's payment rate is the adjusted payment rate 
 plus the real estate tax and special assessment per diem. 

    (6) For the purpose of establishing payment rates under 
 this paragraph, the facility's rate and reporting years coincide 
 with the facility's fiscal year.  

    (d) A facility that meets the criteria of paragraph (c) 
 shall submit annual cost reports on forms prescribed by the 
 commissioner.  

    (e) For the rate year beginning July 1, 1985, each nursing 
 facility total payment rate must be effective two calendar 
 months from the first day of the month after the commissioner 
 issues the rate notice to the nursing facility.  From July 1, 
 1985, until the total payment rate becomes effective, the 
 commissioner shall make payments to each nursing facility at a 
 temporary rate that is the prior rate year's operating cost 
 payment rate increased by 2.6 percent plus the prior rate year's 
 property-related payment rate and the prior rate year's real 
 estate taxes and special assessments payment rate.  The 
 commissioner shall retroactively adjust the property-related 
 payment rate and the real estate taxes and special assessments 
 payment rate to July 1, 1985, but must not retroactively adjust 
 the operating cost payment rate. 

    (f) For the purposes of Minnesota Rules, part 9549.0060, 
 subpart 13, item F, the following types of transactions shall 
 not be considered a sale or reorganization of a provider entity: 

    (1) the sale or transfer of a nursing facility upon death 
 of an owner; 

    (2) the sale or transfer of a nursing facility due to 
 serious illness or disability of an owner as defined under the 
 social security act; 

    (3) the sale or transfer of the nursing facility upon 
 retirement of an owner at 62 years of age or older; 

    (4) any transaction in which a partner, owner, or 
 shareholder acquires an interest or share of another partner, 
 owner, or shareholder in a nursing facility business provided 
 the acquiring partner, owner, or shareholder has less than 50 
 percent ownership after the acquisition; 

    (5) a sale and leaseback to the same licensee which does 
 not constitute a change in facility license; 

    (6) a transfer of an interest to a trust; 

    (7) gifts or other transfers for no consideration; 

    (8) a merger of two or more related organizations; 

    (9) a transfer of interest in a facility held in 
 receivership; 

    (10) a change in the legal form of doing business other 
 than a publicly held organization which becomes privately held 
 or vice versa; 

    (11) the addition of a new partner, owner, or shareholder 
 who owns less than 20 percent of the nursing facility or the 
 issuance of stock; or 

    (12) an involuntary transfer including foreclosure, 
 bankruptcy, or assignment for the benefit of creditors. 

    Any increase in allowable debt or allowable interest 
 expense or other cost incurred as a result of the foregoing 
 transactions shall be a nonallowable cost for purposes of 
 reimbursement under Minnesota Rules, parts 9549.0010 to 
 9549.0080. 

    Subd. 5.    Adjustments.  When resolution of appeals or 
 on-site field audits of the records of nursing facilities within 
 a group result in adjustments to the 60th percentile of the 
 payment rates within the group in the reporting year ending on 
 September 30, 1983, the 60th percentile established for the 
 following rate year for that group shall be increased or 
 decreased by the adjustment amount.  

    Subd. 6. Repealed, 1991 c 292 art 7 s 26 

    Subd. 7.    One-time adjustment to nursing facility 
 payment rates to comply with Omnibus Budget Reconciliation Act. 
  The commissioner shall determine a one-time nursing staff 
 adjustment to the payment rate to adjust payment rates to 
 upgrade certain nursing facilities' professional nursing staff 
 complement to meet the minimum standards of 1987 Public Law 
 Number 100-203.  The adjustments to the payment rates determined 
 under this subdivision cover cost increases to meet minimum 
 standards for professional nursing staff.  For a nursing 
 facility to be eligible for the payment rate adjustment, a 
 nursing facility must have all of its current licensed beds 
 certified solely for the intermediate level of care.  When the 
 commissioner establishes that it is not cost-effective to 
 upgrade an eligible nursing facility to the new minimum staff 
 standards, the commissioner may exclude the nursing facility if 
 it is either an institution for mental disease or a nursing 
 facility that would have been determined to be an institution 
 for mental disease, but for the fact that it has 16 or fewer 
 licensed beds. 

    (a) The increased cost of professional nursing for an 
 eligible nursing facility shall be determined according to 
 clauses (1) to (4): 

    (1) subtract from the number 8760 the compensated hours for 
 professional nurses, both employed and contracted, and, if the 
 result is greater than zero, then multiply the result by $4.55; 

    (2) subtract from the number 2920 the compensated hours for 
 registered nurses, both employed and contracted, and, if the 
 result is greater than zero, then multiply the result by $9.30; 

    (3) if an eligible nursing facility has less than 61 
 licensed beds, the director of nurses' compensated hours must be 
 included in the compensated hours for professional nurses in 
 clause (1).  If the director of nurses is also a registered 
 nurse, the director of nurses' hours must be included in the 
 compensated hours for registered nurses in clause (2); and 

    (4) the one-time nursing staff adjustment to the payment 
 rate shall be the sum of clauses (1) and (2) as adjusted by 
 clause (3), if appropriate, and then divided by the nursing 
 facility's actual resident days for the reporting year ending 
 September 30, 1988. 

    (b) The one-time nursing staff adjustment to the payment 
 rate is effective from January 1, 1990, to June 30, 1991. 

    (c) If a nursing facility is granted a waiver to the 
 minimum professional nursing staff standards under Public Law 
 Number 100-203 for either the professional nurse adjustment 
 referred to in clause (1), or the registered nurse adjustment in 
 clause (2), the commissioner must recover the portion of the 
 nursing facility's payment rate that relates to a one-time 
 nursing staff adjustment granted under this subdivision.  The 
 amount to be recovered shall be based on the type and extent of 
 the waiver granted. 

    (d) Notwithstanding the provisions of paragraph (a), clause 
 (3), if an eligible nursing facility has less than 61 licensed 
 beds, the director of nurses' compensated hours must be excluded 
 from the computation of compensated hours for professional 
 nurses and registered nurses in paragraph (a), clauses (1) and 
 (2).  The commissioner shall recompute the one-time nursing 
 staff adjustment to the payment rate using the data from the 
 cost report for the reporting year ending September 30, 1989, 
 and the adjustment computed under this paragraph shall replace 
 the adjustment previously computed under this subdivision 
 effective October 1, 1990, and shall be effective for the period 
 October 1, 1990, to June 30, 1992. 

    Subd. 8.    One-time per diem rate adjustment for 
 increased costs under the Omnibus Budget Reconciliation Act.  
 For the rate period January 1, 1990, through June 30, 1991, the 
 commissioner shall add 30 cents per resident per day to the 
 nursing facility's payment rate.  The adjustment must not be 
 paid to freestanding boarding care homes.  

    Subd. 9.    One-time adjustment for freestanding boarding 
 care homes to cover increased costs under the Omnibus Budget 
 Reconciliation Act.  (a) The commissioner shall determine a 
 one-time adjustment to the payment rate of a freestanding 
 boarding care home necessary for that home to comply with the 
 provisions of Public Law Number 100-203 except those 
 requirements outlined in subdivision 7.  The adjustment to the 
 payment rate determined under this subdivision covers increased 
 costs for a medical director, nurse aide training for newly 
 hired aides, ongoing in-service training for nurses aides, and 
 other requirements identified by the commissioner that are 
 required because of the Omnibus Budget Reconciliation Act of 
 1987.  These costs will only be reimbursed if they are required 
 in the final regulations pertaining to Public Law Number 100-203.

    (b) Each facility eligible for this adjustment shall submit 
 to the commissioner a detailed estimate of the cost increases 
 the facility will incur for these costs.  

    (c) The costs that are determined by the commissioner to be 
 reasonable and necessary for a freestanding boarding care home 
 to comply with Public Law Number 100-203, except those costs 
 outlined in subdivision 7, must be included in the calculation 
 of the adjustment.  

    (d) The maximum allowable annual adjustment per bed is $300.

    (e) The one-time adjustment is the cost allowed in 
 paragraph (c), subject to the limits in paragraph (d), divided 
 by the nursing facility's actual resident days for the reporting 
 year that ended September 30, 1988.  

    (f) The one-time adjustment determined is effective from 
 January 1, 1990, to June 30, 1991. 

    Subd. 9a.    One-time adjustment for 21-month factor.  
 For the rate period beginning October 1, 1992, the 21-month 
 inflation factor for operating costs shall be increased by 
 seven-tenths of one percent. 

    Subd. 10.    Property rate adjustments and construction 
 projects.  A nursing facility's request for a property-related 
 payment rate adjustment and the related supporting documentation 
 of project construction cost information must be submitted to 
 the commissioner within 60 days after the construction project's 
 completion date to be considered eligible for a property-related 
 payment rate adjustment.  Construction projects with completion 
 dates within one year of the completion date associated with the 
 property rate adjustment request and phased projects with 
 project completion dates within three years of the last phase of 
 the phased project must be aggregated for purposes of the 
 minimum thresholds in subdivisions 16 and 17, and the maximum 
 threshold in section 144A.071, subdivision 2.  "Construction 
 project," "project construction costs," and "phased project" 
 have the meanings given them in Minnesota Rules, part 4655.1110 
 (Emergency). 

    Subd. 11.    Special property rate setting procedures for 
 certain nursing facilities.  Notwithstanding Minnesota Rules, 
 part 9549.0060, subpart 13, item H, to the contrary, for the 
 rate year beginning July 1, 1990, a nursing facility leased 
 prior to January 1, 1986, and currently subject to adverse 
 licensure action under section 144A.04, subdivision 4, paragraph 
 (a), or section 144A.11, subdivision 2, and whose ownership 
 changes prior to July 1, 1990, shall be allowed a 
 property-related payment equal to the lesser of its current 
 lease obligation divided by its capacity days as determined in 
 Minnesota Rules, part 9549.0060, subpart 11, as modified by 
 subdivision 3f, paragraph (c), or the frozen property-related 
 payment rate in effect for the rate year beginning July 1, 
 1989.  For rate years beginning on or after July 1, 1991, the 
 property-related payment rate shall be its rental rate computed 
 using the previous owner's allowable principal and interest 
 expense as allowed by the department prior to that prior owner's 
 sale and lease-back transaction of December 1985. 

    Subd. 12.    Interim property-related payment rates.  
 For the rate period July 1, 1991, to June 30, 1993, the 
 commissioner shall continue the property-related payment rate in 
 effect on June 30, 1991, for each nursing facility, except as 
 provided in section 256B.431, subdivision 3i, paragraphs (f) and 
 (g), and subdivision 11, except that: 

    (1) A chain organization consisting of 28 nursing 
 facilities which has a majority of owners beyond the retirement 
 age of 62 and that has a change in ownership or reorganization 
 of provider entity between July 1, 1991, and June 30, 1993, or 
 until the property reimbursement system is changed, shall 
 receive the property-related payment rate in effect at the time 
 of the sale or reorganization.  This exception is not effective 
 until the commissioner has received approval of its state plan 
 from the federal government; and 

    (2) If the property-related payment rate in effect on June 
 30, 1991, is later adjusted by the commissioner, the 
 property-related payment rate for the rate period July 1, 1991, 
 to July 1, 1993, shall also be adjusted correspondingly. 

    Subd. 13.    Hold-harmless property-related rates.  (a) 
 Terms used in subdivisions 13 to 21 shall be as defined in 
 Minnesota Rules, parts 9549.0010 to 9549.0080, and this section. 

    (b) Except as provided in this subdivision, for rate 
 periods beginning on October 1, 1992, and for rate years 
 beginning after June 30, 1993, the property-related rate for a 
 nursing facility shall be the greater of $4 or the 
 property-related payment rate in effect on September 30, 1992.  
 In addition, the incremental increase in the nursing facility's 
 rental rate will be determined under Minnesota Rules, parts 
 9549.0010 to 9549.0080, and this section. 

    (c) Notwithstanding Minnesota Rules, part 9549.0060, 
 subpart 13, item F, a nursing facility that has a sale permitted 
 under subdivision 14 after June 30, 1992, shall receive the 
 property-related payment rate in effect at the time of the sale 
 or reorganization.  For rate periods beginning after October 1, 
 1992, and for rate years beginning after June 30, 1993, a 
 nursing facility shall receive, in addition to its 
 property-related payment rate in effect at the time of the sale, 
 the incremental increase allowed under subdivision 14. 

    (d) For rate years beginning after June 30, 1993, the 
 property-related rate for a nursing facility licensed after July 
 1, 1989, after relocating its beds from a separate nursing home 
 to a building formerly used as a hospital and sold during the 
 cost reporting year ending September 30, 1991, shall be its 
 property-related rate prior to the sale in addition to the 
 incremental increases provided under this section effective on 
 October 1, 1992, of 29 cents per day, and any incremental 
 increases after October 1, 1992, calculated by using its rental 
 rate under Minnesota Rules, parts 9549.0010 to 9549.0080, and 
 this section, recognizing the current appraised value of the 
 facility at the new location, and including as allowable debt 
 otherwise allowable debt incurred to remodel the facility in the 
 new location prior to the relocation of beds. 

    Subd. 14.    Limitations on sales of nursing facilities. 
  (a) For rate periods beginning on October 1, 1992, and for 
 rate years beginning after June 30, 1993, a nursing facility's 
 property-related payment rate as established under subdivision 
 13 shall be adjusted by either paragraph (b) or (c) for the sale 
 of the nursing facility, including sales occurring after June 
 30, 1992, as provided in this subdivision. 

    (b) If the nursing facility's property-related payment rate 
 under subdivision 13 prior to sale is greater than the nursing 
 facility's rental rate under Minnesota Rules, parts 9549.0010 to 
 9549.0080, and this section prior to sale, the nursing 
 facility's property-related payment rate after sale shall be the 
 greater of its property-related payment rate under subdivision 
 13 prior to sale or its rental rate under Minnesota Rules, parts 
 9549.0010 to 9549.0080, and this section calculated after sale. 

    (c) If the nursing facility's property-related payment rate 
 under subdivision 13 prior to sale is equal to or less than the 
 nursing facility's rental rate under Minnesota Rules, parts 
 9549.0010 to 9549.0080, and this section prior to sale, the 
 nursing facility's property-related payment rate after sale 
 shall be the nursing facility's property-related payment rate 
 under subdivision 13 plus the difference between its rental rate 
 calculated under Minnesota Rules, parts 9549.0010 to 9549.0080, 
 and this section prior to sale and its rental rate calculated 
 under Minnesota Rules, parts 9549.0010 to 9549.0080, and this 
 section calculated after sale. 

    (d) For purposes of this subdivision, "sale" means the 
 purchase of a nursing facility's capital assets with cash or 
 debt.  The term sale does not include a stock purchase of a 
 nursing facility or any of the following transactions:  

    (1) a sale and leaseback to the same licensee that does not 
 constitute a change in facility license; 

    (2) a transfer of an interest to a trust; 

    (3) gifts or other transfers for no consideration; 

    (4) a merger of two or more related organizations; 

    (5) a change in the legal form of doing business, other 
 than a publicly held organization that becomes privately held or 
 vice versa; 

    (6) the addition of a new partner, owner, or shareholder 
 who owns less than 20 percent of the nursing facility or the 
 issuance of stock; and 

    (7) a sale, merger, reorganization, or any other transfer 
 of interest between related organizations other than those 
 permitted in this section.  

    (e) For purposes of this subdivision, "sale" includes the 
 sale or transfer of a nursing facility to a close relative as 
 defined in Minnesota Rules, part 9549.0020, subpart 38, item C, 
 upon the death of an owner, due to serious illness or 
 disability, as defined under the Social Security Act, under 
 United States Code, title 42, section 423(d)(1)(A), or upon 
 retirement of an owner from the business of owning or operating 
 a nursing home at 62 years of age or older.  For sales to a 
 close relative allowed under this paragraph, otherwise 
 nonallowable debt resulting from seller financing of all or a 
 portion of the debt resulting from the sale shall be allowed and 
 shall not be subject to Minnesota Rules, part 9549.0060, subpart 
 5, item E, provided that in addition to existing requirements 
 for allowance of debt and interest, the debt is subject to 
 repayment through annual principal payments and the interest 
 rate on the related organization debt does not exceed three 
 percentage points above the posted yield for standard 
 conventional fixed rate mortgages of the Federal Home Loan 
 Mortgage Corporation for delivery in 60 days in effect on the 
 day of sale.  If at any time, the seller forgives the related 
 organization debt allowed under this paragraph for other than 
 equal amount of payment on that debt, then the buyer shall pay 
 to the state the total revenue received by the nursing facility 
 after the sale attributable to the amount of allowable debt 
 which has been forgiven.  Any assignment, sale, or transfer of 
 the debt instrument entered into by the close relatives, either 
 directly or indirectly, which grants to the close relative buyer 
 the right to receive all or a portion of the payments under the 
 debt instrument shall, effective on the date of the transfer, 
 result in the prospective reduction in the corresponding portion 
 of the allowable debt and interest expense.  Upon the death of 
 the close relative seller, any remaining balance of the close 
 relative debt must be refinanced and such refinancing shall be 
 subject to the provisions of Minnesota Rules, part 9549.0060, 
 subpart 7, item G.  This paragraph shall not apply to sales 
 occurring on or after June 30, 1997.  

    (f) For purposes of this subdivision, "effective date of 
 sale" means the later of either the date on which legal title to 
 the capital assets is transferred or the date on which closing 
 for the sale occurred.  

    (g) The effective day for the property-related payment rate 
 determined under this subdivision shall be the first day of the 
 month following the month in which the effective date of sale 
 occurs or October 1, 1992, whichever is later, provided that the 
 notice requirements under section 256B.47, subdivision 2, have 
 been met. 

    (h) Notwithstanding Minnesota Rules, part 9549.0060, 
 subparts 5, item A, subitems (3) and (4), and 7, items E and F, 
 the commissioner shall limit the total allowable debt and 
 related interest for sales occurring after June 30, 1992, to the 
 sum of clauses (1) to (3):  

    (1) the historical cost of capital assets, as of the 
 nursing facility's most recent previous effective date of sale 
 or, if there has been no previous sale, the nursing facility's 
 initial historical cost of constructing capital assets; 

    (2) the average annual capital asset additions after 
 deduction for capital asset deletions, not including 
 depreciations; and 

    (3) one-half of the allowed inflation on the nursing 
 facility's capital assets.  The commissioner shall compute the 
 allowed inflation as described in paragraph (h). 

    (i) For purposes of computing the amount of allowed 
 inflation, the commissioner must apply the following principles: 

    (1) the lesser of the Consumer Price Index for all urban 
 consumers or the Dodge Construction Systems Costs for Nursing 
 Homes for any time periods during which both are available must 
 be used.  If the Dodge Construction Systems Costs for Nursing 
 Homes becomes unavailable, the commissioner shall substitute the 
 index in subdivision 3f, or such other index as the secretary of 
 the health care financing administration may designate; 

    (2) the amount of allowed inflation to be applied to the 
 capital assets in paragraph (g), clauses (1) and (2), must be 
 computed separately; 

    (3) the amount of allowed inflation must be determined on 
 an annual basis, prorated on a monthly basis for partial years 
 and if the initial month of use is not determinable for a 
 capital asset, then one-half of that calendar year shall be used 
 for purposes of prorating; 

    (4) the amount of allowed inflation to be applied to the 
 capital assets in paragraph (g), clauses (1) and (2), must not 
 exceed 300 percent of the total capital assets in any one of 
 those clauses; and 

    (5) the allowed inflation must be computed starting with 
 the month following the nursing facility's most recent previous 
 effective date of sale or, if there has been no previous sale, 
 the month following the date of the nursing facility's initial 
 occupancy, and ending with the month preceding the effective 
 date of sale. 

    (j) If the historical cost of a capital asset is not 
 readily available for the date of the nursing facility's most 
 recent previous sale or if there has been no previous sale for 
 the date of the nursing facility's initial occupancy, then the 
 commissioner shall limit the total allowable debt and related 
 interest after sale to the extent recognized by the Medicare 
 intermediary after the sale.  For a nursing facility that has no 
 historical capital asset cost data available and does not have 
 allowable debt and interest calculated by the Medicare 
 intermediary, the commissioner shall use the historical cost of 
 capital asset data from the point in time for which capital 
 asset data is recorded in the nursing facility's audited 
 financial statements. 

    (k) The limitations in this subdivision apply only to debt 
 resulting from a sale of a nursing facility occurring after June 
 30, 1992, including debt assumed by the purchaser of the nursing 
 facility. 

    Subd. 15.    Capital repair and replacement cost reporting 
 and rate calculation.  For rate years beginning after June 30, 
 1993, a nursing facility's capital repair and replacement 
 payment rate shall be established annually as provided in 
 paragraphs (a) to (e).  

    (a) Notwithstanding Minnesota Rules, part 9549.0060, 
 subpart 12, the costs of any of the following items not included 
 in the equity incentive computations under subdivision 16 or 
 reported as a capital asset addition under subdivision 18, 
 paragraph (b), including cash payment for equity investment and 
 principal and interest expense for debt financing, must be 
 reported in the capital repair and replacement cost category: 

    (1) wall coverings; 

    (2) paint; 

    (3) floor coverings; 

    (4) window coverings; 

    (5) roof repair; and 

    (6) window repair or replacement. 

    (b) Notwithstanding Minnesota Rules, part 9549.0060, 
 subpart 12, the repair or replacement of a capital asset not 
 included in the equity incentive computations under subdivision 
 16 or reported as a capital asset addition under subdivision 18, 
 paragraph (b), must be reported under this subdivision when the 
 cost of the item exceeds $500, or in the plant operations and 
 maintenance cost category when the cost of the item is equal to 
 or less than $500. 

    (c) To compute the capital repair and replacement payment 
 rate, the allowable annual repair and replacement costs for the 
 reporting year must be divided by actual resident days for the 
 reporting year.  The annual allowable capital repair and 
 replacement costs shall not exceed $150 per licensed bed.  The 
 excess of the allowed capital repair and replacement costs over 
 the capital repair and replacement limit shall be a cost 
 carryover to succeeding cost reporting periods, except that sale 
 of a facility, under subdivision 14, shall terminate the 
 carryover of all costs except those incurred in the most recent 
 cost reporting year.  The termination of the carryover shall 
 have effect on the capital repair and replacement rate on the 
 same date as provided in subdivision 14, paragraph (f), for the 
 sale.  For rate years beginning after June 30, 1994, the capital 
 repair and replacement limit shall be subject to the index 
 provided in subdivision 3f, paragraph (a).  For purposes of this 
 subdivision, the number of licensed beds shall be the number 
 used to calculate the nursing facility's capacity days.  The 
 capital repair and replacement rate must be added to the nursing 
 facility's total payment rate. 

    (d) Capital repair and replacement costs under this 
 subdivision shall not be counted as either care-related or other 
 operating costs, nor subject to care-related or other operating 
 limits. 

    (e) If costs otherwise allowable under this subdivision are 
 incurred as the result of a project approved under the 
 moratorium exception process in section 144A.073, or in 
 connection with an addition to or replacement of buildings, 
 attached fixtures, or land improvements for which the total 
 historical cost of these assets exceeds the lesser of $150,000 
 or ten percent of the nursing facility's appraised value, these 
 costs must be claimed under subdivision 16 or 17, as appropriate.

    Subd. 16.    Major additions and replacements; equity 
 incentive.  For rate years beginning after June 30, 1993, if a 
 nursing facility acquires capital assets in connection with a 
 project approved under the moratorium exception process in 
 section 144A.073 or in connection with an addition to or 
 replacement of buildings, attached fixtures, or land 
 improvements for which the total historical cost of those 
 capital asset additions exceeds the lesser of $150,000 or ten 
 percent of the most recent appraised value, the nursing facility 
 shall be eligible for an equity incentive payment rate as in 
 paragraphs (a) to (d).  This computation is separate from the 
 determination of the nursing facility's rental rate.  An equity 
 incentive payment rate as computed under this subdivision is 
 limited to one in a 12-month period. 

    (a) An eligible nursing facility shall receive an equity 
 incentive payment rate equal to the allowable historical cost of 
 the capital asset acquired, minus the allowable debt directly 
 identified to that capital asset, multiplied by the equity 
 incentive factor as described in paragraphs (b) and (c), and 
 divided by the nursing facility's occupancy factor under 
 subdivision 3f, paragraph (c).  This amount shall be added to 
 the nursing facility's total payment rate and shall be effective 
 the same day as the incremental increase in paragraph (d) or 
 subdivision 17.  The allowable historical cost of the capital 
 assets and the allowable debt shall be determined as provided in 
 Minnesota Rules, parts 9549.0010 to 9549.0080, and this section. 

    (b) The equity incentive factor shall be determined under 
 clauses (1) to (4):  

    (1) divide the initial allowable debt in paragraph (a) by 
 the initial historical cost of the capital asset additions 
 referred to in paragraph (a), then cube the quotient, 

    (2) subtract the amount calculated in clause (1) from the 
 number one, 

    (3) determine the difference between the rental factor and 
 the lesser of two percentage points above the posted yield for 
 standard conventional fixed rate mortgages of the Federal Home 
 Loan Mortgage Corporation as published in the Wall Street 
 Journal and in effect on the first day of the month the debt or 
 cost is incurred, or 16 percent, 

    (4) multiply the amount calculated in clause (2) by the 
 amount calculated in clause (3). 

    (c) The equity incentive payment rate shall be limited to 
 the term of the allowable debt in paragraph (a), not greater 
 than 20 years nor less than ten years.  If no debt is incurred 
 in acquiring the capital asset, the equity incentive payment 
 rate shall be paid for ten years.  The sale of a nursing 
 facility under subdivision 14 shall terminate application of the 
 equity incentive payment rate effective on the date provided in 
 subdivision 4, paragraph (f), for the sale. 

    (d) A nursing facility with an addition to or a renovation 
 of its buildings, attached fixtures, or land improvements 
 meeting the criteria in this subdivision and not receiving the 
 property-related payment rate adjustment in subdivision 17, 
 shall receive the incremental increase in the nursing facility's 
 rental rate as determined under Minnesota Rules, parts 9549.0010 
 to 9549.0080, and this section.  The incremental increase shall 
 be added to the nursing facility's property-related payment rate.
 The effective date of this incremental increase shall be the 
 first day of the month following the month in which the addition 
 or replacement is completed. 

    Subd. 17.    Special provisions for moratorium exceptions. 
  (a) Notwithstanding Minnesota Rules, part 9549.0060, subpart 
 3, for rate periods beginning on October 1, 1992, and for rate 
 years beginning after June 30, 1993, a nursing facility that (1) 
 has completed a construction project approved under section 
 144A.071, subdivision 4a, clause (m); (2) has completed a 
 construction project approved under section 144A.071, 
 subdivision 4a, and effective after June 30, 1995; or (3) has 
 completed a renovation, replacement, or upgrading project 
 approved under the moratorium exception process in section 
 144A.073 shall be reimbursed for costs directly identified to 
 that project as provided in subdivision 16 and this subdivision. 

    (b) Notwithstanding Minnesota Rules, part 9549.0060, 
 subparts 5, item A, subitems (1) and (3), and 7, item D, 
 allowable interest expense on debt shall include: 

    (1) interest expense on debt related to the cost of 
 purchasing or replacing depreciable equipment, excluding 
 vehicles, not to exceed six percent of the total historical cost 
 of the project; and 

    (2) interest expense on debt related to financing or 
 refinancing costs, including costs related to points, loan 
 origination fees, financing charges, legal fees, and title 
 searches; and issuance costs including bond discounts, bond 
 counsel, underwriter's counsel, corporate counsel, printing, and 
 financial forecasts.  Allowable debt related to items in this 
 clause shall not exceed seven percent of the total historical 
 cost of the project.  To the extent these costs are financed, 
 the straight-line amortization of the costs in this clause is 
 not an allowable cost; and 

    (3) interest on debt incurred for the establishment of a 
 debt reserve fund, net of the interest earned on the debt 
 reserve fund. 

    (c) Debt incurred for costs under paragraph (b) is not 
 subject to Minnesota Rules, part 9549.0060, subpart 5, item A, 
 subitem (5) or (6). 

    (d) The incremental increase in a nursing facility's rental 
 rate, determined under Minnesota Rules, parts 9549.0010 to 
 9549.0080, and this section, resulting from the acquisition of 
 allowable capital assets, and allowable debt and interest 
 expense under this subdivision shall be added to its 
 property-related payment rate and shall be effective on the 
 first day of the month following the month in which the 
 moratorium project was completed. 

    (e) Notwithstanding subdivision 3f, paragraph (a), for rate 
 periods beginning on October 1, 1992, and for rate years 
 beginning after June 30, 1993, the replacement-costs-new per bed 
 limit to be used in Minnesota Rules, part 9549.0060, subpart 4, 
 item B, for a nursing facility that has completed a renovation, 
 replacement, or upgrading project that has been approved under 
 the moratorium exception process in section 144A.073, or that 
 has completed an addition to or replacement of buildings, 
 attached fixtures, or land improvements for which the total 
 historical cost exceeds the lesser of $150,000 or ten percent of 
 the most recent appraised value, must be $47,500 per licensed 
 bed in multiple-bed rooms and $71,250 per licensed bed in a 
 single-bed room.  These amounts must be adjusted annually as 
 specified in subdivision 3f, paragraph (a), beginning January 1, 
 1993. 

    (f) A nursing facility that completes a project identified 
 in this subdivision and, as of April 17, 1992, has not been 
 mailed a rate notice with a special appraisal for a completed 
 project, or completes a project after April 17, 1992, but before 
 September 1, 1992, may elect either to request a special 
 reappraisal with the corresponding adjustment to the 
 property-related payment rate under the laws in effect on June 
 30, 1992, or to submit their capital asset and debt information 
 after that date and obtain the property-related payment rate 
 adjustment under this section, but not both. 

    (g) For purposes of this paragraph, a total replacement 
 means the complete replacement of the nursing facility's 
 physical plant through the construction of a new physical plant 
 or the transfer of the nursing facility's license from one 
 physical plant location to another.  For total replacement 
 projects completed on or after July 1, 1992, the commissioner 
 shall compute the incremental change in the nursing facility's 
 rental per diem, for rate years beginning on or after July 1, 
 1995, by replacing its appraised value, including the historical 
 capital asset costs, and the capital debt and interest costs 
 with the new nursing facility's allowable capital asset costs 
 and the related allowable capital debt and interest costs.  If 
 the new nursing facility has decreased its licensed capacity, 
 the aggregate investment per bed limit in subdivision 3a, 
 paragraph (d), shall apply.  If the new nursing facility has 
 retained a portion of the original physical plant for nursing 
 facility usage, then a portion of the appraised value prior to 
 the replacement must be retained and included in the calculation 
 of the incremental change in the nursing facility's rental per 
 diem.  For purposes of this part, the original nursing facility 
 means the nursing facility prior to the total replacement 
 project.  The portion of the appraised value to be retained 
 shall be calculated according to clauses (1) to (3): 

    (1) The numerator of the allocation ratio shall be the 
 square footage of the area in the original physical plant which 
 is being retained for nursing facility usage. 

    (2) The denominator of the allocation ratio shall be the 
 total square footage of the original nursing facility physical 
 plant. 

    (3) Each component of the nursing facility's allowable 
 appraised value prior to the total replacement project shall be 
 multiplied by the allocation ratio developed by dividing clause 
 (1) by clause (2). 

    In the case of either type of total replacement as 
 authorized under section 144A.071 or 144A.073, the provisions of 
 this subdivision shall also apply.  For purposes of the 
 moratorium exception authorized under section 144A.071, 
 subdivision 4a, paragraph (s), if the total replacement involves 
 the renovation and use of an existing health care facility 
 physical plant, the new allowable capital asset costs and 
 related debt and interest costs shall include first the 
 allowable capital asset costs and related debt and interest 
 costs of the renovation, to which shall be added the allowable 
 capital asset costs of the existing physical plant prior to the 
 renovation, and if reported by the facility, the related 
 allowable capital debt and interest costs. 

    Subd. 18.    Appraisals; updating appraisals, additions, 
 and replacements.  (a) Notwithstanding Minnesota Rules, part 
 9549.0060, subparts 1 to 3, the appraised value, routine 
 updating of the appraised value, and special reappraisals are 
 subject to this subdivision. 

    (1) For rate years beginning after June 30, 1993, the 
 commissioner shall permit a nursing facility to appeal its 
 appraisal.  Any reappraisals conducted in connection with that 
 appeal must utilize the comparative-unit method as described in 
 the Marshall Valuation Service published by Marshall-Swift in 
 establishing the nursing facility's depreciated replacement cost.

    Nursing facilities electing to appeal their appraised value 
 shall file written notice of appeal with the commissioner of 
 human services before December 30, 1992.  The cost of the 
 reappraisal, if any, shall be considered an allowable cost under 
 Minnesota Rules, parts 9549.0040, subpart 9, and 9549.0061. 

    (2) The redetermination of a nursing facility's appraised 
 value under this paragraph shall have no impact on the rental 
 payment rate determined under subdivision 13 but shall only be 
 used for calculating the nursing facility's rental rate under 
 Minnesota Rules, parts 9549.0010 to 9549.0080, and this section 
 for rate years beginning after June 30, 1993.  

    (3) For all rate years after June 30, 1993, the 
 commissioner shall no longer conduct any appraisals under 
 Minnesota Rules, part 9549.0060, for the purpose of determining 
 property-related payment rates. 

    (b) Notwithstanding Minnesota Rules, part 9549.0060, 
 subpart 2, for rate years beginning after June 30, 1993, the 
 commissioner shall routinely update the appraised value of each 
 nursing facility by adding the cost of capital asset 
 acquisitions to its allowable appraised value.  

    The commissioner shall also annually index each nursing 
 facility's allowable appraised value by the inflation index 
 referenced in subdivision 3f, paragraph (a), for the purpose of 
 computing the nursing facility's annual rental rate.  In 
 annually adjusting the nursing facility's appraised value, the 
 commissioner must not include the historical cost of capital 
 assets acquired during the reporting year in the nursing 
 facility's appraised value. 

    In addition, the nursing facility's appraised value must be 
 reduced by the historical cost of capital asset disposals or 
 applicable credits such as public grants and insurance 
 proceeds.  Capital asset additions and disposals must be 
 reported on the nursing facility's annual cost report in the 
 reporting year of acquisition or disposal.  The incremental 
 increase in the nursing facility's rental rate resulting from 
 this annual adjustment as determined under Minnesota Rules, 
 parts 9549.0010 to 9549.0080, and this section shall be added to 
 the nursing facility's property-related payment rate for the 
 rate year following the reporting year.  

    Subd. 19.    Refinancing incentive.  (a) A nursing 
 facility that refinances debt after May 30, 1992, in order to 
 save in interest expense payments as determined in clauses (1) 
 to (5) may be eligible for the refinancing incentive under this 
 subdivision.  To be eligible for the refinancing incentive, a 
 nursing facility must notify the commissioner in writing of such 
 a refinancing within 60 days following the date on which the 
 refinancing occurs.  If the nursing facility meets these 
 conditions, the commissioner shall determine the refinancing 
 incentive as in clauses (1) to (5).  

    (1) Compute the aggregate amount of interest expense, 
 including amortized issuance and financing costs, remaining on 
 the debt to be refinanced, and divide this amount by the number 
 of years remaining for the term of that debt. 

    (2) Compute the aggregate amount of interest expense, 
 including amortized issuance and financing costs, for the new 
 debt, and divide this amount by the number of years for the term 
 of that debt. 

    (3) Subtract the amount in clause (2) from the amount in 
 clause (1), and multiply the amount, if positive, by .5. 

    (4) The amount in clause (3) shall be divided by the 
 nursing facility's occupancy factor under subdivision 3f, 
 paragraph (c). 

    (5) The per diem amount in clause (4) shall be deducted 
 from the nursing facility's property-related payment rate for 
 three full rate years following the rate year in which the 
 refinancing occurs.  For the fourth full rate year following the 
 rate year in which the refinancing occurs, and each rate year 
 thereafter, the per diem amount in clause (4) shall again be 
 deducted from the nursing facility's property-related payment 
 rate. 

    (b) An increase in a nursing facility's debt for costs in 
 subdivision 17, paragraph (b), clause (2), including the cost of 
 refinancing the issuance or financing costs of the debt 
 refinanced resulting from refinancing that meets the conditions 
 of this section shall be allowed, notwithstanding Minnesota 
 Rules, part 9549.0060, subpart 5, item A, subitem (6).  

    (c) The proceeds of refinancing may not be used for the 
 purpose of withdrawing equity from the nursing facility. 

    (d) Sale of a nursing facility under subdivision 14 shall 
 terminate the payment of the incentive payments under this 
 subdivision effective the date provided in subdivision 14, 
 paragraph (f), for the sale, and the full amount of the 
 refinancing incentive in paragraph (a) shall be implemented. 

    (e) If a nursing facility eligible under this subdivision 
 fails to notify the commissioner as required, the commissioner 
 shall determine the full amount of the refinancing incentive in 
 paragraph (a), and shall deduct one-half that amount from the 
 nursing facility's property-related payment rate effective the 
 first day of the month following the month in which the 
 refinancing is completed.  For the next three full rate years, 
 the commissioner shall deduct one-half the amount in paragraph 
 (a), clause (5).  The remaining per diem amount shall be 
 deducted in each rate year thereafter. 

    (f) The commissioner shall reestablish the nursing 
 facility's rental rate under Minnesota Rules, parts 9549.0010 to 
 9549.0080, and this section following the refinancing using the 
 new debt and interest expense information for the purpose of 
 measuring future incremental rental increases. 

    Subd. 20.    Special property rate setting.  For rate 
 periods beginning on October 1, 1992, and for rate years 
 beginning after June 30, 1993, the property-related payment rate 
 for a nursing facility approved for total replacement under the 
 moratorium exception process in section 144A.073 through an 
 addition to another nursing facility shall have its 
 property-related rate under subdivision 13 recalculated using 
 the greater of actual resident days or 80 percent of capacity 
 days.  This rate shall apply until the nursing facility is 
 replaced or until the moratorium exception authority lapses, 
 whichever is sooner. 

    Subd. 21.    Indexing thresholds.  Beginning January 1, 
 1993, and each January 1 thereafter, the commissioner shall 
 annually update the dollar thresholds in subdivisions 15, 
 paragraph (d), 16, and 17, and in section 144A.071, subdivisions 
 2 and 4a, clauses (b) and (e), by the inflation index referenced 
 in subdivision 3f, paragraph (a). 

    Subd. 22.    Changes to nursing facility reimbursement.  
 The nursing facility reimbursement changes in paragraphs (a) to 
 (e) apply to Minnesota Rules, parts 9549.0010 to 9549.0080, and 
 this section, and are effective for rate years beginning on or 
 after July 1, 1993, unless otherwise indicated. 

    (a) In addition to the approved pension or profit sharing 
 plans allowed by the reimbursement rule, the commissioner shall 
 allow those plans specified in Internal Revenue Code, sections 
 403(b) and 408(k). 

    (b) The commissioner shall allow as workers' compensation 
 insurance costs under section 256B.421, subdivision 14, the 
 costs of workers' compensation coverage obtained under the 
 following conditions: 

    (1) a plan approved by the commissioner of commerce as a 
 Minnesota group or individual self-insurance plan as provided in 
 section 79A.03; 

    (2) a plan in which: 

    (i) the nursing facility, directly or indirectly, purchases 
 workers' compensation coverage in compliance with section 
 176.181, subdivision 2, from an authorized insurance carrier; 

    (ii) a related organization to the nursing facility 
 reinsures the workers' compensation coverage purchased, directly 
 or indirectly, by the nursing facility; and 

    (iii) all of the conditions in clause (4) are met; 

    (3) a plan in which: 

    (i) the nursing facility, directly or indirectly, purchases 
 workers' compensation coverage in compliance with section 
 176.181, subdivision 2, from an authorized insurance carrier; 

    (ii) the insurance premium is calculated retrospectively, 
 including a maximum premium limit, and paid using the paid loss 
 retro method; and 

    (iii) all of the conditions in clause (4) are met; 

    (4) additional conditions are: 

    (i) the costs of the plan are allowable under the federal 
 Medicare program; 

    (ii) the reserves for the plan are maintained in an account 
 controlled and administered by a person which is not a related 
 organization to the nursing facility; 

    (iii) the reserves for the plan cannot be used, directly or 
 indirectly, as collateral for debts incurred or other 
 obligations of the nursing facility or related organizations to 
 the nursing facility; 

    (iv) if the plan provides workers' compensation coverage 
 for non-Minnesota nursing facilities, the plan's cost 
 methodology must be consistent among all nursing facilities 
 covered by the plan, and if reasonable, is allowed 
 notwithstanding any reimbursement laws regarding cost allocation 
 to the contrary; 

    (v) central, affiliated, corporate, or nursing facility 
 costs related to their administration of the plan are costs 
 which must remain in the nursing facility's administrative cost 
 category and must not be allocated to other cost categories; and 

    (vi) required security deposits, whether in the form of 
 cash, investments, securities, assets, letters of credit, or in 
 any other form are not allowable costs for purposes of 
 establishing the facilities payment rate. 

    (5) any costs allowed pursuant to clauses (1) to (3) are 
 subject to the following requirements: 

    (i) if the nursing facility is sold or otherwise ceases 
 operations, the plan's reserves must be subject to an 
 actuarially based settle-up after 36 months from the date of 
 sale or the date on which operations ceased.  The facility's 
 medical assistance portion of the total excess plan reserves 
 must be paid to the state within 30 days following the date on 
 which excess plan reserves are determined; 

    (ii) any distribution of excess plan reserves made to or 
 withdrawals made by the nursing facility or a related 
 organization are applicable credits and must be used to reduce 
 the nursing facility's workers' compensation insurance costs in 
 the reporting period in which a distribution or withdrawal is 
 received; 

    (iii) if reimbursement for the plan is sought under the 
 federal Medicare program, and is audited pursuant to the 
 Medicare program, the nursing facility must provide a copy of 
 Medicare's final audit report, including attachments and 
 exhibits, to the commissioner within 30 days of receipt by the 
 nursing facility or any related organization.  The commissioner 
 shall implement the audit findings associated with the plan upon 
 receipt of Medicare's final audit report.  The department's 
 authority to implement the audit findings is independent of its 
 authority to conduct a field audit. 

    (c) In the determination of incremental increases in the 
 nursing facility's rental rate as required in subdivisions 14 to 
 21, except for a refinancing permitted under subdivision 19, the 
 commissioner must adjust the nursing facility's property-related 
 payment rate for both incremental increases and decreases in 
 recomputations of its rental rate; 

    (d) A nursing facility's administrative cost limitation 
 must be modified as follows: 

    (1) if the nursing facility's licensed beds exceed 195 
 licensed beds, the general and administrative cost category 
 limitation shall be 13 percent; 

    (2) if the nursing facility's licensed beds are more than 
 150 licensed beds, but less than 196 licensed beds, the general 
 and administrative cost category limitation shall be 14 percent; 
 or 

    (3) if the nursing facility's licensed beds is less than 
 151 licensed beds, the general and administrative cost category 
 limitation shall remain at 15 percent. 

    (e) The care related operating rate shall be increased by 
 eight cents to reimburse facilities for unfunded federal 
 mandates, including costs related to hepatitis B vaccinations. 

    Subd. 23.    County nursing home payment adjustments.  
 (a) Beginning in 1994, the commissioner shall pay a nursing home 
 payment adjustment on May 31 after noon to a county in which is 
 located a nursing home that, as of January 1 of the previous 
 year, was county-owned and operated, with the county named as 
 licensee by the commissioner of health, and had over 40 beds and 
 medical assistance occupancy in excess of 50 percent during the 
 reporting year ending September 30, 1991.  The adjustment shall 
 be an amount equal to $16 per calendar day multiplied by the 
 number of beds licensed in the facility as of September 30, 1991.

    (b) Payments under paragraph (a) are excluded from medical 
 assistance per diem rate calculations.  These payments are 
 required notwithstanding any rule prohibiting medical assistance 
 payments from exceeding payments from private pay residents.  A 
 facility receiving a payment under paragraph (a) may not 
 increase charges to private pay residents by an amount 
 equivalent to the per diem amount payments under paragraph (a) 
 would equal if converted to a per diem. 

    Subd. 24.    Modified efficiency incentive.  
 Notwithstanding section 256B.74, subdivision 3, for the rate 
 year beginning July 1, 1993, the maximum efficiency incentive is 
 $2.20, and for rate years beginning on or after July 1, 1994, 
 the commissioner shall determine a nursing facility's efficiency 
 incentive by first computing the amount by which the facility's 
 other operating cost limit exceeds its nonadjusted other 
 operating cost per diem for that rate year.  The commissioner 
 shall then use the following table to compute the nursing 
 facility's efficiency incentive.  Each increment or partial 
 increment the nursing facility's nonadjusted other operating per 
 diem is below its other operating cost limit shall be multiplied 
 by the corresponding percentage for that per diem increment.  
 The sum of each of those computations shall be the nursing 
 facility's efficiency incentive. 

       Other Operating Cost             Percentage Applied
       Per Diem Increment                to Each Per Diem
       Below Facility Limit                 Increment

      Less than $0.50                       70 percent
      $0.50 to less than $0.70              10 percent
      $0.70 to less than $0.90              15 percent
      $0.90 to less than $1.10              20 percent
      $1.10 to less than $1.30              25 percent
      $1.30 to less than $1.50              30 percent
      $1.50 to less than $1.70              35 percent
      $1.70 to less than $1.90              40 percent
      $1.90 to less than $2.10              45 percent
      $2.10 to less than $2.30              50 percent
      $2.30 to less than $2.50              55 percent
      $2.50 to less than $2.70              60 percent
      $2.70 to less than $2.90              65 percent
      $2.90 to less than $3.10              70 percent
      $3.10 to less than $3.30              75 percent
      $3.30 to less than $3.50              80 percent
      $3.50 to less than $3.70              85 percent
      $3.70 to less than $3.90              90 percent 
      $3.90 to less than $4.10              95 percent 
      $4.10 to less than $4.30             100 percent 

    The maximum efficiency incentive is $2.44 per resident day. 

    Subd. 25.    Changes to nursing facility reimbursement 
 beginning July 1, 1995.  The nursing facility reimbursement 
 changes in paragraphs (a) to (g) shall apply in the sequence 
 specified to Minnesota Rules, parts 9549.0010 to 9549.0080, and 
 this section, beginning July 1, 1995. 

    (a) The eight-cent adjustment to care-related rates in 
 subdivision 22, paragraph (e), shall no longer apply. 

    (b) For rate years beginning on or after July 1, 1995, the 
 commissioner shall limit a nursing facility's allowable 
 operating per diem for each case mix category for each rate year 
 as in clauses (1) to (3). 

    (1) For the rate year beginning July 1, 1995, the 
 commissioner shall group nursing facilities into two groups, 
 freestanding and nonfreestanding, within each geographic group, 
 using their operating cost per diem for the case mix A 
 classification.  A nonfreestanding nursing facility is a nursing 
 facility whose other operating cost per diem is subject to the 
 hospital attached, short length of stay, or the rule 80 limits.  
 All other nursing facilities shall be considered freestanding 
 nursing facilities.  The commissioner shall then array all 
 nursing facilities in each grouping by their allowable case mix 
 A operating cost per diem.  In calculating a nursing facility's 
 operating cost per diem for this purpose, the commissioner shall 
 exclude the raw food cost per diem related to providing special 
 diets that are based on religious beliefs, as determined in 
 subdivision 2b, paragraph (h).  For those nursing facilities in 
 each grouping whose case mix A operating cost per diem: 

    (i) is at or below the median minus 1.0 standard deviation 
 of the array, the commissioner shall limit the nursing 
 facility's allowable operating cost per diem for each case mix 
 category to the lesser of the prior reporting year's allowable 
 operating cost per diems plus the inflation factor as 
 established in paragraph (f), clause (2), increased by six 
 percentage points, or the current reporting year's corresponding 
 allowable operating cost per diem; 

    (ii) is between minus .5 standard deviation and minus 1.0 
 standard deviation below the median of the array, the 
 commissioner shall limit the nursing facility's allowable 
 operating cost per diem for each case mix category to the lesser 
 of the prior reporting year's allowable operating cost per diems 
 plus the inflation factor as established in paragraph (f), 
 clause (2), increased by four percentage points, or the current 
 reporting year's corresponding allowable operating cost per 
 diem; or 

    (iii) is equal to or above minus .5 standard deviation 
 below the median of the array, the commissioner shall limit the 
 nursing facility's allowable operating cost per diem for each 
 case mix category to the lesser of the prior reporting year's 
 allowable operating cost per diems plus the inflation factor as 
 established in paragraph (f), clause (2), increased by three 
 percentage points, or the current reporting year's corresponding 
 allowable operating cost per diem. 

    (2) For the rate year beginning on July 1, 1996, the 
 commissioner shall limit the nursing facility's allowable 
 operating cost per diem for each case mix category to the lesser 
 of the prior reporting year's allowable operating cost per diems 
 plus the inflation factor as established in paragraph (f), 
 clause (2), increased by one percentage point or the current 
 reporting year's corresponding allowable operating cost per 
 diems; and 

    (3) For rate years beginning on or after July 1, 1997, the 
 commissioner shall limit the nursing facility's allowable 
 operating cost per diem for each case mix category to the lesser 
 of the reporting year prior to the current reporting year's 
 allowable operating cost per diems plus the inflation factor as 
 established in paragraph (f), clause (2), or the current 
 reporting year's corresponding allowable operating cost per 
 diems. 

    (c) For rate years beginning on July 1, 1995, the 
 commissioner shall limit the allowable operating cost per diems 
 for high cost nursing facilities.  After application of the 
 limits in paragraph (b) to each nursing facility's operating 
 cost per diems, the commissioner shall group nursing facilities 
 into two groups, freestanding or nonfreestanding, within each 
 geographic group.  A nonfreestanding nursing facility is a 
 nursing facility whose other operating cost per diems are 
 subject to hospital attached, short length of stay, or rule 80 
 limits.  All other nursing facilities shall be considered 
 freestanding nursing facilities.  The commissioner shall then 
 array all nursing facilities within each grouping by their 
 allowable case mix A operating cost per diems.  In calculating a 
 nursing facility's operating cost per diem for this purpose, the 
 commissioner shall exclude the raw food cost per diem related to 
 providing special diets that are based on religious beliefs, as 
 determined in subdivision 2b, paragraph (h).  For those nursing 
 facilities in each grouping whose case mix A operating cost per 
 diem exceeds 1.0 standard deviation above the median, the 
 commissioner shall reduce their allowable operating cost per 
 diems by two percent.  For those nursing facilities in each 
 grouping whose case mix A operating cost per diem exceeds 0.5 
 standard deviation above the median but is less than or equal to 
 1.0 standard deviation above the median, the commissioner shall 
 reduce their allowable operating cost per diems by one percent. 

    (d) For rate years beginning on or after July 1, 1996, the 
 commissioner shall limit the allowable operating cost per diems 
 for high cost nursing facilities.  After application of the 
 limits in paragraph (b) to each nursing facility's operating 
 cost per diems, the commissioner shall group nursing facilities 
 into two groups, freestanding or nonfreestanding, within each 
 geographic group.  A nonfreestanding nursing facility is a 
 nursing facility whose other operating cost per diems are 
 subject to hospital attached, short length of stay, or rule 80 
 limits.  All other nursing facilities shall be considered 
 freestanding nursing facilities.  The commissioner shall then 
 array all nursing facilities within each grouping by their 
 allowable case mix A operating cost per diems.  In calculating a 
 nursing facility's operating cost per diem for this purpose, the 
 commissioner shall exclude the raw food cost per diem related to 
 providing special diets that are based on religious beliefs, as 
 determined in subdivision 2b, paragraph (h).  In those nursing 
 facilities in each grouping whose case mix A operating cost per 
 diem exceeds 1.0 standard deviation above the median, the 
 commissioner shall reduce their allowable operating cost per 
 diems by three percent.  For those nursing facilities in each 
 grouping whose case mix A operating cost per diem exceeds 0.5 
 standard deviation above the median but is less than or equal to 
 1.0 standard deviation above the median, the commissioner shall 
 reduce their allowable operating cost per diems by two percent. 

    (e) For rate years beginning on or after July 1, 1995, the 
 commissioner shall determine a nursing facility's efficiency 
 incentive by first computing the allowable difference, which is 
 the lesser of $4.50 or the amount by which the facility's other 
 operating cost limit exceeds its nonadjusted other operating 
 cost per diem for that rate year.  The commissioner shall 
 compute the efficiency incentive by: 

    (1) subtracting the allowable difference from $4.50 and 
 dividing the result by $4.50; 

    (2) multiplying 0.20 by the ratio resulting from clause 
 (1), and then; 

    (3) adding 0.50 to the result from clause (2); and 

    (4) multiplying the result from clause (3) times the 
 allowable difference. 

    The nursing facility's efficiency incentive payment shall 
 be the lesser of $2.25 or the product obtained in clause (4). 

    (f) For rate years beginning on or after July 1, 1995, the 
 forecasted price index for a nursing facility's allowable 
 operating cost per diems shall be determined under clauses (1) 
 to (3) using the change in the Consumer Price Index-All Items 
 (United States city average) (CPI-U) or the change in the 
 Nursing Home Market Basket, both as forecasted by Data Resources 
 Inc., whichever is applicable.  The commissioner shall use the 
 indices as forecasted in the fourth quarter of the calendar year 
 preceding the rate year, subject to subdivision 2l, paragraph 
 (c).  If, as a result of federal legislative or administrative 
 action, the methodology used to calculate the Consumer Price 
 Index-All Items (United States city average) (CPI-U) changes, 
 the commissioner shall develop a conversion factor or other 
 methodology to convert the CPI-U index factor that results from 
 the new methodology to an index factor that approximates, as 
 closely as possible, the index factor that would have resulted 
 from application of the original CPI-U methodology prior to any 
 changes in methodology.  The commissioner shall use the 
 conversion factor or other methodology to calculate an adjusted 
 inflation index.  The adjusted inflation index must be used to 
 calculate payment rates under this section instead of the CPI-U 
 index specified in paragraph (d).  If the commissioner is 
 required to develop an adjusted inflation index, the 
 commissioner shall report to the legislature as part of the next 
 budget submission the fiscal impact of applying this index. 

    (1) The CPI-U forecasted index for allowable operating cost 
 per diems shall be based on the 21-month period from the 
 midpoint of the nursing facility's reporting year to the 
 midpoint of the rate year following the reporting year. 

    (2) The Nursing Home Market Basket forecasted index for 
 allowable operating costs and per diem limits shall be based on 
 the 12-month period between the midpoints of the two reporting 
 years preceding the rate year. 

    (3) For rate years beginning on or after July 1, 1996, the 
 forecasted index for operating cost limits referred to in 
 subdivision 21, paragraph (b), shall be based on the CPI-U for 
 the 12-month period between the midpoints of the two reporting 
 years preceding the rate year. 

    (g) After applying these provisions for the respective rate 
 years, the commissioner shall index these allowable operating 
 costs per diems by the inflation factor provided for in 
 paragraph (f), clause (1), and add the nursing facility's 
 efficiency incentive as computed in paragraph (e). 

    (h)(1) A nursing facility licensed for 302 beds on 
 September 30, 1993, that was approved under the moratorium 
 exception process in section 144A.073 for a partial replacement, 
 and completed the replacement project in December 1994, is 
 exempt from paragraphs (b) to (d) for rate years beginning on or 
 after July 1, 1995. 

    (2) For the rate year beginning July 1, 1997, after 
 computing this nursing facility's payment rate according to 
 section 256B.434, the commissioner shall make a one-year rate 
 adjustment of $8.62 to the facility's contract payment rate for 
 the rate effect of operating cost changes associated with the 
 facility's 1994 downsizing project. 

    (3) For rate years beginning on or after July 1, 1997, the 
 commissioner shall add 35 cents to the facility's base property 
 related payment rate for the rate effect of reducing its 
 licensed capacity to 290 beds from 302 beds and shall add 83 
 cents to the facility's real estate tax and special assessment 
 payment rate for payments in lieu of real estate taxes.  The 
 adjustments in this clause shall remain in effect for the 
 duration of the facility's contract under section 256B.434. 

    (i) Notwithstanding Laws 1996, chapter 451, article 3, 
 section 11, paragraph (h), for the rate years beginning on July 
 1, 1996, July 1, 1997, and July 1, 1998, a nursing facility 
 licensed for 40 beds effective May 1, 1992, with a subsequent 
 increase of 20 Medicare/Medicaid certified beds, effective 
 January 26, 1993, in accordance with an increase in licensure is 
 exempt from paragraphs (b) to (d). 

    Subd. 26.    Changes to nursing facility reimbursement 
 beginning July 1, 1997.  The nursing facility reimbursement 
 changes in paragraphs (a) to (f) shall apply in the sequence 
 specified in Minnesota Rules, parts 9549.0010 to 9549.0080, and 
 this section, beginning July 1, 1997. 

    (a) For rate years beginning on or after July 1, 1997, the 
 commissioner shall limit a nursing facility's allowable 
 operating per diem for each case mix category for each rate year.
 The commissioner shall group nursing facilities into two groups, 
 freestanding and nonfreestanding, within each geographic group, 
 using their operating cost per diem for the case mix A 
 classification.  A nonfreestanding nursing facility is a nursing 
 facility whose other operating cost per diem is subject to the 
 hospital attached, short length of stay, or the rule 80 limits.  
 All other nursing facilities shall be considered freestanding 
 nursing facilities.  The commissioner shall then array all 
 nursing facilities in each grouping by their allowable case mix 
 A operating cost per diem.  In calculating a nursing facility's 
 operating cost per diem for this purpose, the commissioner shall 
 exclude the raw food cost per diem related to providing special 
 diets that are based on religious beliefs, as determined in 
 subdivision 2b, paragraph (h).  For those nursing facilities in 
 each grouping whose case mix A operating cost per diem: 

    (1) is at or below the median of the array, the 
 commissioner shall limit the nursing facility's allowable 
 operating cost per diem for each case mix category to the lesser 
 of the prior reporting year's allowable operating cost per diem 
 as specified in Laws 1996, chapter 451, article 3, section 11, 
 paragraph (h), plus the inflation factor as established in 
 paragraph (d), clause (2), increased by two percentage points, 
 or the current reporting year's corresponding allowable 
 operating cost per diem; or 

    (2) is above the median of the array, the commissioner 
 shall limit the nursing facility's allowable operating cost per 
 diem for each case mix category to the lesser of the prior 
 reporting year's allowable operating cost per diem as specified 
 in Laws 1996, chapter 451, article 3, section 11, paragraph (h), 
 plus the inflation factor as established in paragraph (d), 
 clause (2), increased by one percentage point, or the current 
 reporting year's corresponding allowable operating cost per diem.

    (b) For rate years beginning on or after July 1, 1997, the 
 commissioner shall limit the allowable operating cost per diem 
 for high cost nursing facilities.  After application of the 
 limits in paragraph (a) to each nursing facility's operating 
 cost per diem, the commissioner shall group nursing facilities 
 into two groups, freestanding or nonfreestanding, within each 
 geographic group.  A nonfreestanding nursing facility is a 
 nursing facility whose other operating cost per diem are subject 
 to hospital attached, short length of stay, or rule 80 limits.  
 All other nursing facilities shall be considered freestanding 
 nursing facilities.  The commissioner shall then array all 
 nursing facilities within each grouping by their allowable case 
 mix A operating cost per diem.  In calculating a nursing 
 facility's operating cost per diem for this purpose, the 
 commissioner shall exclude the raw food cost per diem related to 
 providing special diets that are based on religious beliefs, as 
 determined in subdivision 2b, paragraph (h).  For those nursing 
 facilities in each grouping whose case mix A operating cost per 
 diem exceeds 1.0 standard deviation above the median, the 
 commissioner shall reduce their allowable operating cost per 
 diem by three percent.  For those nursing facilities in each 
 grouping whose case mix A operating cost per diem exceeds 0.5 
 standard deviation above the median but is less than or equal to 
 1.0 standard deviation above the median, the commissioner shall 
 reduce their allowable operating cost per diem by two percent.  
 However, in no case shall a nursing facility's operating cost 
 per diem be reduced below its grouping's limit established at 
 0.5 standard deviations above the median. 

    (c) For rate years beginning on or after July 1, 1997, the 
 commissioner shall determine a nursing facility's efficiency 
 incentive by first computing the allowable difference, which is 
 the lesser of $4.50 or the amount by which the facility's other 
 operating cost limit exceeds its nonadjusted other operating 
 cost per diem for that rate year.  The commissioner shall 
 compute the efficiency incentive by: 

    (1) subtracting the allowable difference from $4.50 and 
 dividing the result by $4.50; 

    (2) multiplying 0.20 by the ratio resulting from clause 
 (1), and then; 

    (3) adding 0.50 to the result from clause (2); and 

    (4) multiplying the result from clause (3) times the 
 allowable difference. 

    The nursing facility's efficiency incentive payment shall 
 be the lesser of $2.25 or the product obtained in clause (4). 

    (d) For rate years beginning on or after July 1, 1997, the 
 forecasted price index for a nursing facility's allowable 
 operating cost per diem shall be determined under clauses (1) 
 and (2) using the change in the Consumer Price Index-All Items 
 (United States city average) (CPI-U) as forecasted by Data 
 Resources, Inc.  The commissioner shall use the indices as 
 forecasted in the fourth quarter of the calendar year preceding 
 the rate year, subject to subdivision 2l, paragraph (c).  

    (1) The CPI-U forecasted index for allowable operating cost 
 per diem shall be based on the 21-month period from the midpoint 
 of the nursing facility's reporting year to the midpoint of the 
 rate year following the reporting year. 

    (2) For rate years beginning on or after July 1, 1997, the 
 forecasted index for operating cost limits referred to in 
 subdivision 21, paragraph (b), shall be based on the CPI-U for 
 the 12-month period between the midpoints of the two reporting 
 years preceding the rate year. 

    (e) After applying these provisions for the respective rate 
 years, the commissioner shall index these allowable operating 
 cost per diem by the inflation factor provided for in paragraph 
 (d), clause (1), and add the nursing facility's efficiency 
 incentive as computed in paragraph (c). 

    (f) For rate years beginning on or after July 1, 1997, the 
 total operating cost payment rates for a nursing facility shall 
 be the greater of the total operating cost payment rates 
 determined under this section or the total operating cost 
 payment rates in effect on June 30, 1997, subject to rate 
 adjustments due to field audit or rate appeal resolution.  This 
 provision shall not apply to subsequent field audit adjustments 
 of the nursing facility's operating cost rates for rate years 
 beginning on or after July 1, 1997. 

    (g) For the rate years beginning on July 1, 1997, and July 
 1, 1998, a nursing facility licensed for 40 beds effective May 
 1, 1992, with a subsequent increase of 20 Medicare/Medicaid 
 certified beds, effective January 26, 1993, in accordance with 
 an increase in licensure is exempt from paragraphs (a) and (b). 

    (h) For a nursing facility whose construction project was 
 authorized according to section 144A.073, subdivision 5, 
 paragraph (g), the operating cost payment rates for the third 
 location shall be determined based on Minnesota Rules, part 
 9549.0057.  Paragraphs (a) and (b) shall not apply until the 
 second rate year after the settle-up cost report is filed.  
 Notwithstanding subdivision 2b, paragraph (g), real estate taxes 
 and special assessments payable by the third location, a 
 501(c)(3) nonprofit corporation, shall be included in the 
 payment rates determined under this subdivision for all 
 subsequent rate years. 

    (i) For the rate year beginning July 1, 1997, the 
 commissioner shall compute the payment rate for a nursing 
 facility licensed for 94 beds on September 30, 1996, that 
 applied in October 1993 for approval of a total replacement 
 under the moratorium exception process in section 144A.073, and 
 completed the approved replacement in June 1995, with other 
 operating cost spend-up limit under paragraph (a), increased by 
 $3.98, and after computing the facility's payment rate according 
 to this section, the commissioner shall make a one-year positive 
 rate adjustment of $3.19 for operating costs related to the 
 newly constructed total replacement, without application of 
 paragraphs (a) and (b).  The facility's per diem, before the 
 $3.19 adjustment, shall be used as the prior reporting year's 
 allowable operating cost per diem for payment rate calculation 
 for the rate year beginning July 1, 1998.  A facility described 
 in this paragraph is exempt from paragraph (b) for the rate 
 years beginning July 1, 1997, and July 1, 1998. 

    (j) For the purpose of applying the limit stated in 
 paragraph (a), a nursing facility in Kandiyohi county licensed 
 for 86 beds that was granted hospital-attached status on 
 December 1, 1994, shall have the prior year's allowable 
 care-related per diem increased by $3.207 and the prior year's 
 other operating cost per diem increased by $4.777 before adding 
 the inflation in paragraph (d), clause (2), for the rate year 
 beginning on July 1, 1997. 

    (k) For the purpose of applying the limit stated in 
 paragraph (a), a 117 bed nursing facility located in Pine county 
 shall have the prior year's allowable other operating cost per 
 diem increased by $1.50 before adding the inflation in paragraph 
 (d), clause (2), for the rate year beginning on July 1, 1997. 

    (l) For the purpose of applying the limit under paragraph 
 (a), a nursing facility in Hibbing licensed for 192 beds shall 
 have the prior year's allowable other operating cost per diem 
 increased by $2.67 before adding the inflation in paragraph (d), 
 clause (2), for the rate year beginning July 1, 1997. 

    HIST: 1983 c 199 s 12; 1984 c 640 s 32; 1984 c 641 s 17-20,22; 
 1984 c 654 art 5 s 58; 1984 c 655 art 1 s 40,41; 1985 c 248 s 
 40,69; 1985 c 267 s 3; 1Sp1985 c 3 s 25,27-29,31; 1986 c 316 s 
 2; 1987 c 403 art 2 s 89; art 4 s 6-11; 1988 c 689 art 2 s 
 154-161; 1988 c 719 art 19 s 9; 1989 c 12 s 1,2; 1989 c 282 art 
 3 s 66-78; 1990 c 568 art 3 s 65-72; 1991 c 292 art 4 s 54-60; 
 art 6 s 49,50; art 7 s 25; 1992 c 464 art 1 s 29; 1992 c 513 art 
 7 s 88-103,136; 1992 c 603 s 19; 1993 c 339 s 20; 1Sp1993 c 1 
 art 5 s 90-99; 1995 c 207 art 6 s 85,86; art 7 s 23-26; 1996 c 
 305 art 2 s 48; 1996 c 451 art 3 s 3; 1997 c 2 s 10; 1997 c 107 
 s 8; 1997 c 187 art 3 s 29; 1997 c 203 art 3 s 7,8; art 4 s 46