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Minnesota Legislature

Office of the Revisor of Statutes

256B.432 LONG-TERM CARE FACILITIES; OFFICE COSTS.
    Subdivision 1. Definitions. For purposes of this section, the following terms have the
meanings given them.
(a) "Management agreement" means an agreement in which one or more of the following
criteria exist:
(1) the central, affiliated, or corporate office has or is authorized to assume day-to-day
operational control of the nursing facility for any six-month period within a 24-month period.
"Day-to-day operational control" means that the central, affiliated, or corporate office has the
authority to require, mandate, direct, or compel the employees of the nursing facility to perform
or refrain from performing certain acts, or to supplant or take the place of the top management of
the nursing facility. "Day-to-day operational control" includes the authority to hire or terminate
employees or to provide an employee of the central, affiliated, or corporate office to serve as
administrator of the nursing facility;
(2) the central, affiliated, or corporate office performs or is authorized to perform two or more
of the following: the execution of contracts; authorization of purchase orders; signature authority
for checks, notes, or other financial instruments; requiring the nursing facility to use the group or
volume purchasing services of the central, affiliated, or corporate office; or the authority to make
annual capital expenditures for the nursing facility exceeding $50,000, or $500 per licensed bed,
whichever is less, without first securing the approval of the nursing facility board of directors;
(3) the central, affiliated, or corporate office becomes or is required to become the licensee
under applicable state law;
(4) the agreement provides that the compensation for services provided under the agreement
is directly related to any profits made by the nursing facility; or
(5) the nursing facility entering into the agreement is governed by a governing body that
meets fewer than four times a year, that does not publish notice of its meetings, or that does
not keep formal records of its proceedings.
(b) "Consulting agreement" means any agreement the purpose of which is for a central,
affiliated, or corporate office to advise, counsel, recommend, or suggest to the owner or operator
of the nonrelated nursing facility measures and methods for improving the operations of the
nursing facility.
(c) "Nursing facility" means a facility with a medical assistance provider agreement that
is licensed as a nursing home under chapter 144A or as a boarding care home under sections
144.50 to 144.56.
    Subd. 2. Effective date. For rate years beginning on or after July 1, 1990, the central,
affiliated, or corporate office cost allocations in subdivisions 3 to 6 must be used when determining
medical assistance rates under section 256B.431, 256B.434, or 256B.441.
    Subd. 3. Allocation; direct identification of costs; management agreement. All costs that
can be directly identified with a specific nursing facility that is a related organization to the
central, affiliated, or corporate office, or that is controlled by the central, affiliated, or corporate
office under a management agreement, must be allocated to that nursing facility.
    Subd. 4. Allocation; direct identification of costs to other activities. All costs that can
be directly identified with any other activity or function not described in subdivision 3 must be
allocated to that activity or function.
    Subd. 4a. Cost allocation on a functional basis. (a) Costs that have not been directly
identified must be allocated to nursing facilities on a basis designed to equitably allocate the costs
to the nursing facilities or activities receiving the benefits of the costs. This allocation must be
made in a manner reasonably related to the services received by the nursing facilities. Where
practical and the amounts are material, these costs must be allocated on a functional basis. The
functions, or cost centers used to allocate central office costs, and the unit bases used to allocate
the costs, including those central office costs allocated according to subdivision 5, must be used
consistently from one central office accounting period to another.
(b) If the central office wishes to change its allocation bases and believes the change will
result in more appropriate and more accurate allocations, the central office must make a written
request, with its justification, to the commissioner for approval of the change no later than 120
days after the beginning of the central office accounting period to which the change is to apply.
The commissioner's approval of a central office request will be furnished to the central office in
writing. Where the commissioner approves the central office request, the change must be applied
to the accounting period for which the request was made, and to all subsequent central office
accounting periods unless the commissioner approves a subsequent request for change by the
central office. The effective date of the change will be the beginning of the accounting period for
which the request was made.
    Subd. 5. Allocation of remaining costs; allocation ratio. (a) After the costs that can be
directly identified according to subdivisions 3 and 4 have been allocated, the remaining central,
affiliated, or corporate office costs must be allocated between the nursing facility operations and
the other activities or facilities unrelated to the nursing facility operations based on the ratio of
total operating costs. However, in the event that these remaining costs are partially attributable to
the start-up of home and community-based services intended to fill a gap identified by the local
agency, the facility may assign these remaining costs to the appropriate cost category of the
facility for a period not to exceed two years.
(b) For purposes of allocating these remaining central, affiliated, or corporate office costs,
the numerator for the allocation ratio shall be determined as follows:
(1) for nursing facilities that are related organizations or are controlled by a central, affiliated,
or corporate office under a management agreement, the numerator of the allocation ratio shall be
equal to the sum of the total operating costs incurred by each related organization or controlled
nursing facility;
(2) for a central, affiliated, or corporate office providing goods or services to related
organizations that are not nursing facilities, the numerator of the allocation ratio shall be equal to
the sum of the total operating costs incurred by the nonnursing facility related organizations;
(3) for a central, affiliated, or corporate office providing goods or services to unrelated nursing
facilities under a consulting agreement, the numerator of the allocation ratio shall be equal to the
greater of directly identified central, affiliated, or corporate costs or the contracted amount; or
(4) for business activities that involve the providing of goods or services to unrelated parties
which are not nursing facilities, the numerator of the allocation ratio shall be equal to the greater
of directly identified costs or revenues generated by the activity or function.
(c) The denominator for the allocation ratio is the sum of the numerators in paragraph (b),
clauses (1) to (4).
    Subd. 6. Cost allocation between nursing facilities. (a) Those nursing operations that have
nursing facilities both in Minnesota and comparable facilities outside of Minnesota must allocate
the nursing operation's central, affiliated, or corporate office costs identified in subdivision 5 to
Minnesota based on the ratio of total resident days in Minnesota nursing facilities to the total
resident days in all facilities.
(b) The Minnesota nursing operation's central, affiliated, or corporate office costs identified
in paragraph (a) must be allocated to each Minnesota nursing facility on the basis of resident days.
    Subd. 6a. Related organization costs. (a) Costs applicable to services, capital assets, and
supplies directly or indirectly furnished to the nursing facility by any related organization are
includable in the allowable cost of the nursing facility at the purchase price paid by the related
organization for capital assets or supplies and at the cost incurred by the related organization for
the provision of services to the nursing facility if these prices or costs do not exceed the price
of comparable services, capital assets, or supplies that could be purchased elsewhere. For this
purpose, the related organization's costs must not include an amount for markup or profit.
(b) If the related organization in the normal course of business sells services, capital assets,
or supplies to nonrelated organizations, the cost to the nursing facility shall be the nonrelated
organization's price provided that sales to nonrelated organizations constitute at least 50 percent
of total annual sales of similar services, capital assets, or supplies.
    Subd. 7. Receiverships. This section does not apply to payment rates determined under
sections 245A.12, 245A.13, and 256B.495, except that any additional directly identified costs
associated with the Department of Human Services' or the department of health's managing agent
under a receivership agreement must be allocated to the facility under receivership, and are
nonallowable costs to the managing agent on the facility's cost reports.
    Subd. 8. Adequate documentation supporting long-term care facility payrolls. Beginning
July 1, 1998, payroll records supporting compensation costs claimed by long-term care facilities
must be supported by affirmative time and attendance records prepared by each individual
at intervals of not more than one month. The requirements of this subdivision are met when
documentation is provided under either clause (1) or (2) as follows:
(1) the affirmative time and attendance record must identify the individual's name; the
days worked during each pay period; the number of hours worked each day; and the number of
hours taken each day by the individual for vacation, sick, and other leave. The affirmative time
and attendance record must include a signed verification by the individual and the individual's
supervisor, if any, that the entries reported on the record are correct; or
(2) if the affirmative time and attendance records identifying the individual's name, the days
worked each pay period, the number of hours worked each day, and the number of hours taken
each day by the individual for vacation, sick, and other leave are placed on microfilm, equipment
must be made available for viewing and printing them, or if the records are stored as automated
data, summary data must be available for viewing and printing.
History: 1990 c 568 art 3 s 73; 1992 c 513 art 7 s 104,136; 1Sp1993 c 1 art 5 s 100,101;
1995 c 207 art 7 s 27-31; 1996 c 451 art 5 s 27; 1998 c 274 s 1; 1Sp2005 c 4 art 7 s 35-39