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    Subdivision 1. In general. Effective July 1, 2001, the commissioner shall implement a
performance-based contracting system to replace the current method of setting operating cost
payment rates under sections 256B.431 and 256B.434 and Minnesota Rules, parts 9549.0010
to 9549.0080. Operating cost payment rates for newly established facilities under Minnesota
Rules, part 9549.0057, shall be established using section 256B.431 and Minnesota Rules,
parts 9549.0010 to 9549.0070. A nursing facility in operation on May 1, 1998, with payment
rates not established under section 256B.431 or 256B.434 on that date, is ineligible for this
performance-based contracting system. In determining prospective payment rates of nursing
facility services, the commissioner shall distinguish between operating costs and property-related
costs. The commissioner of finance shall include an annual inflationary adjustment in operating
costs for nursing facilities using the inflation factor specified in subdivision 3 and funding for
incentive-based payments as a budget change request in each biennial detailed expenditure
budget submitted to the legislature under section 16A.11. Property related payment rates,
including real estate taxes and special assessments, shall be determined under section 256B.431
or 256B.434 or under a new property-related reimbursement system, if one is implemented by the
commissioner under subdivision 3. The commissioner shall present additional recommendations
for performance-based contracting for nursing facilities to the legislature by February 15, 2000, in
the following specific areas:
(1) development of an interim default payment mechanism for nursing facilities that do
not respond to the state's request for proposal but wish to continue participation in the medical
assistance program, and nursing facilities the state does not select in the request for proposal
process, and nursing facilities whose contract has been canceled;
(2) development of criteria for facilities to earn performance-based incentive payments based
on relevant outcomes negotiated by nursing facilities and the commissioner and that recognize
both continuous quality efforts and quality improvement;
(3) development of criteria and a process under which nursing facilities can request rate
adjustments for low base rates, geographic disparities, or other reasons;
(4) development of a dispute resolution mechanism for nursing facilities that are denied a
contract, denied incentive payments, or denied a rate adjustment;
(5) development of a property payment system to address the capital needs of nursing
facilities that will be funded with additional appropriations;
(6) establishment of a transitional plan to move from dual assessment instruments to the
federally mandated resident assessment system, whereby the financial impact for each facility
would be budget neutral;
(7) identification of net cost implications for facilities and to the department of preparing for
and implementing performance-based contracting or any proposed alternative system;
(8) identification of facility financial and statistical reporting requirements; and
(9) identification of exemptions from current regulations and statutes applicable under
performance-based contracting.
    Subd. 1a. Requests for proposals. (a) For nursing facilities with rates established under
section 256B.434 on January 1, 2001, the commissioner shall renegotiate contracts without
requiring a response to a request for proposal, notwithstanding the solicitation process described
in chapter 16C.
(b) Prior to July 1, 2001, the commissioner shall publish in the State Register a request for
proposals to provide nursing facility services according to this section. The commissioner will
consider proposals from all nursing facilities that have payment rates established under section
256B.431. The commissioner must respond to all proposals in a timely manner.
(c) In issuing a request for proposals, the commissioner may develop reasonable requirements
which, in the judgment of the commissioner, are necessary to protect residents or ensure that the
performance-based contracting system furthers the interests of the state of Minnesota. The request
for proposals may include, but need not be limited to:
(1) a requirement that a nursing facility make reasonable efforts to maximize Medicare
payments on behalf of eligible residents;
(2) requirements designed to prevent inappropriate or illegal discrimination against residents
enrolled in the medical assistance program as compared to private paying residents;
(3) requirements designed to ensure that admissions to a nursing facility are appropriate
and that reasonable efforts are made to place residents in home and community-based settings
when appropriate;
(4) a requirement to agree to participate in the development of data collection systems
and outcome-based standards. Among other requirements specified by the commissioner, each
facility entering into a contract may be required to pay an annual fee not to exceed $1,000. The
commissioner must use revenue generated from the fees to contract with a qualified consultant or
contractor to develop data collection systems and outcome-based contracting standards;
(5) a requirement that Medicare-certified contractors agree to maintain Medicare cost reports
and to submit them to the commissioner upon request, or at times specified by the commissioner;
and that contractors that are not Medicare-certified agree to maintain a uniform cost report in a
format established by the commissioner and to submit the report to the commissioner upon
request, or at times specified by the commissioner;
(6) a requirement that demonstrates willingness and ability to develop and maintain data
collection and retrieval systems to measure outcomes; and
(7) a requirement to provide all information and assurances required by the terms and
conditions of the federal waiver or federal approval.
(d) In addition to the information and assurances contained in the submitted proposals, the
commissioner may consider the following criteria in developing the terms of the contract:
(1) the facility's history of compliance with federal and state laws and rules. A facility
deemed to be in substantial compliance with federal and state laws and rules is eligible to respond
to a request for proposals. A facility's compliance history shall not be the sole determining factor
in situations where the facility has been sold and the new owners have submitted a proposal;
(2) whether the facility has a record of excessive licensure fines or sanctions or fraudulent
cost reports;
(3) the facility's financial history and solvency; and
(4) other factors identified by the commissioner deemed relevant to developing the terms of
the contract, including a determination that a contract with a particular facility is not in the best
interests of the residents of the facility or the state of Minnesota.
(e) Notwithstanding the requirements of the solicitation process described in chapter 16C,
the commissioner may contract with nursing facilities established according to section 144A.073
without issuing a request for proposals.
(f) Notwithstanding subdivision 1, after July 1, 2001, the commissioner may contract with
additional nursing facilities, according to requests for proposals.
    Subd. 2. Contract provisions. (a) The performance-based contract with each nursing facility
must include provisions that:
(1) apply the resident case mix assessment provisions of Minnesota Rules, parts 9549.0051,
9549.0058, and 9549.0059, or another assessment system, with the goal of moving to a single
assessment system;
(2) monitor resident outcomes through various methods, such as quality indicators based on
the minimum data set and other utilization and performance measures;
(3) require the establishment and use of a continuous quality improvement process that
integrates information from quality indicators and regular resident and family satisfaction
(4) require annual reporting of facility statistical information, including resident days by
case mix category, productive nursing hours, wages and benefits, and raw food costs for use by
the commissioner in the development of facility profiles that include trends in payment and
service utilization;
(5) require from each nursing facility an annual certified audited financial statement
consisting of a balance sheet, income and expense statements, and an opinion from either a
licensed or certified public accountant, if a certified audit was prepared, or unaudited financial
statements if no certified audit was prepared;
(6) specify the method for resolving disputes; and
(7) establish additional requirements for nursing facilities not meeting the standards set forth
in the performance-based contract.
(b) The commissioner may develop additional incentive-based payments for achieving
specified outcomes specified in each contract. The specified facility-specific outcomes must be
measurable and approved by the commissioner.
(c) The commissioner may also contract with nursing facilities in other ways through
requests for proposals, including contracts on a risk or nonrisk basis, with nursing facilities or
consortia of nursing facilities, to provide comprehensive long-term care coverage on a premium
or capitated basis.
(d) The commissioner may negotiate different contract terms for different nursing facilities.
    Subd. 2a. Duration and termination of contracts. (a) All contracts entered into under this
section are for a term of one year. Either party may terminate this contract at any time without
cause by providing 90 calendar days' advance written notice to the other party. Notwithstanding
section 16C.05, subdivisions 2, paragraph (b), and 5, if neither party provides written notice
of termination, the contract shall be renegotiated for additional one-year terms or the terms
of the existing contract will be extended for one year. The provisions of the contract shall be
renegotiated annually by the parties prior to the expiration date of the contract. The parties may
voluntarily renegotiate the terms of the contract at any time by mutual agreement.
(b) If a nursing facility fails to comply with the terms of a contract, the commissioner shall
provide reasonable notice regarding the breach of contract and a reasonable opportunity for the
facility to come into compliance. If the facility fails to come into compliance or to remain in
compliance, the commissioner may terminate the contract. If a contract is terminated, provisions
of section 256B.48, subdivision 1a, shall apply.
    Subd. 3. Payment rate provisions. (a) For rate years beginning on or after July 1, 2001,
within the limits of appropriations specifically for this purpose, the commissioner shall determine
operating cost payment rates for each licensed and certified nursing facility by indexing its
operating cost payment rates in effect on June 30, 2001, for inflation. For rate years beginning on
or after July 1, 2001, the inflation factor must be based on the change in the Employment Cost
Index for Private Industry Workers - Total Compensation as forecasted by the commissioner
of finance's national economic consultant, in the fourth quarter preceding the rate year. The
forecasted index for operating cost payment rates shall be based on the 12-month period from
the midpoint of the nursing facility's prior rate year to the midpoint of the rate year for which
the operating payment rate is being determined. The operating cost payment rate to be inflated
shall be the total payment rate in effect on June 30, 2001, minus the portion determined to be the
property-related payment rate, minus the per diem amount of the preadmission screening cost
included in the nursing facility's last payment rate established under section 256B.431.
(b) A per diem amount for preadmission screening will be added onto the contract payment
rates according to the method of distribution of county allocation described in section 256B.0911,
subdivision 6
, paragraph (a).
(c) For rate years beginning on or after July 1, 2001, the commissioner may implement a
new method of payment for property-related costs that addresses the capital needs of facilities.
The new property payment system or systems, if implemented, shall replace the current methods
of setting property payment rates under sections 256B.431 and 256B.434.
    Subd. 4. Contract payment rates; appeals. If an appeal is pending concerning the
cost-based payment rates that are the basis for the calculation of the payment rate under this
section, the commissioner and the nursing facility may agree on an interim contract rate to be
used until the appeal is resolved. When the appeal is resolved, the contract rate must be adjusted
retroactively according to the appeal decision.
    Subd. 5. Consumer protection. In addition to complying with all applicable laws regarding
consumer protection, as a condition of entering into a contract under this section, a nursing
facility must agree to:
(1) establish resident grievance procedures;
(2) establish expedited grievance procedures to resolve complaints made by short-stay
residents; and
(3) make available to residents and families a copy of the performance-based contract and
outcomes to be achieved.
    Subd. 6. Contracts are voluntary. Participation of nursing facilities in the medical
assistance program is voluntary. The terms and procedures governing the performance-based
contract are determined under this section and through negotiations between the commissioner
and nursing facilities.
    Subd. 7. Federal requirements. The commissioner shall implement the performance-based
contracting system subject to any required federal waivers or approval and in a manner that is
consistent with federal requirements. If a provision of this section is inconsistent with a federal
requirement, the federal requirement supersedes the inconsistent provision. The commissioner
shall seek federal approval and request waivers as necessary to implement this section.
    Subd. 8. Case-mix adjustments based upon the minimum data set. The performance-based
contracting system must include case-mix adjustments that are based upon the federally mandated
minimum data set assessment instrument. These case-mix adjustments must be incorporated into
the performance-based contracting system beginning on or after July 1, 2001, but no later than
January 1, 2002, and must have a budget neutral financial impact on each facility at the time of
implementation, relative to case-mix adjustments based upon the current state case-mix.
History: 1998 c 407 art 3 s 14; 1999 c 245 art 3 s 25; 2000 c 315 s 1; 1Sp2003 c 1 art 2 s 76

Official Publication of the State of Minnesota
Revisor of Statutes