1997 Minnesota Statutes

     256B.434 Contractual alternative payment demonstration 
  project for nursing homes. 

    Subdivision 1.    Alternative payment demonstration 
 project established.  The commissioner of human services shall 
 establish a contractual alternative payment demonstration 
 project for paying for nursing facility services under the 
 medical assistance program.  A nursing facility may apply to be 
 paid under the contractual alternative payment demonstration 
 project instead of the cost-based payment system established 
 under section 256B.431.  A nursing facility electing to use the 
 alternative payment demonstration project must enter into a 
 contract with the commissioner.  Payment rates and procedures 
 for facilities electing to use the alternative payment 
 demonstration project are determined and governed by this 
 section and by the terms of the contract.  The commissioner may 
 negotiate different contract terms for different nursing 
 facilities. 

    Subd. 2.    Requests for proposals.  (a) At least twice 
 annually the commissioner shall publish in the State Register a 
 request for proposals to provide nursing facility services 
 according to this section.  The commissioner must respond to all 
 proposals in a timely manner. 

    (b) The commissioner may reject any proposal if, in the 
 judgment of the commissioner, a contract with a particular 
 facility is not in the best interests of the residents of the 
 facility or the state of Minnesota.  The commissioner may accept 
 up to the number of proposals that can be adequately supported 
 with available state resources, as determined by the 
 commissioner.  The commissioner may accept proposals from a 
 single nursing facility or from a group of facilities through a 
 managing entity.  The commissioner shall seek to ensure that 
 nursing facilities under contract are located in all geographic 
 areas of the state.  

    (c) In issuing the 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 contractual alternative payment demonstration project 
 furthers the interest of the state of Minnesota.  The request 
 for proposals may include, but need not be limited to, the 
 following: 

    (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 a project to 
 develop 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.  Revenue generated from the fees is appropriated to 
 the commissioner and must be used to contract with a qualified 
 consultant or contractor to develop data collection systems and 
 outcome-based contracting standards; 

    (5) a requirement that contractors agree to maintain 
 Medicare cost reports and to submit them to the commissioner 
 upon request or at times specified by the commissioner; 

    (6) a requirement for demonstrated willingness and ability 
 to develop and maintain data collection and retrieval systems to 
 be used in measuring 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 in determining whether to accept or deny a proposal: 

    (1) the facility's history of compliance with federal and 
 state laws and rules, except that a facility deemed to be in 
 substantial compliance with federal and state laws and rules is 
 eligible to respond to a request for proposal.  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) financial history and solvency; and 

    (4) other factors identified by the commissioner that the 
 commissioner deems relevant to 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) If the commissioner rejects the proposal of a nursing 
 facility, the commissioner shall provide written notice to the 
 facility of the reason for the rejection, including the factors 
 and evidence upon which the rejection was based. 

    Subd. 3.    Duration and termination of contracts.  (a) 
 Subject to available resources, the commissioner may begin to 
 execute contracts with nursing facilities November 1, 1995. 

    (b) All contracts entered into under this section are for a 
 term of one year.  Either party may terminate a contract at any 
 time without cause by providing 30 calendar days advance written 
 notice to the other party.  The decision to terminate a contract 
 is not appealable.  If neither party provides written notice of 
 termination the contract shall be renegotiated for additional 
 one-year terms, for up to a total of four consecutive one-year 
 terms.  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. 

    (c) 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, the contract payment remains in effect for the 
 remainder of the rate year in which the contract was terminated, 
 but in all other respects the provisions of this section do not 
 apply to that facility effective the date the contract is 
 terminated.  The contract shall contain a provision governing 
 the transition back to the cost-based reimbursement system 
 established under section 256B.431, subdivision 25, and 
 Minnesota Rules, parts 9549.0010 to 9549.0080.  A contract 
 entered into under this section may be amended by mutual 
 agreement of the parties. 

    Subd. 4.    Alternate rates for nursing facilities.  (a) 
 For nursing facilities which have their payment rates determined 
 under this section rather than section 256B.431, subdivision 25, 
 the commissioner shall establish a rate under this subdivision.  
 The nursing facility must enter into a written contract with the 
 commissioner. 

    (b) A nursing facility's case mix payment rate for the 
 first rate year of a facility's contract under this section is 
 the payment rate the facility would have received under section 
 256B.431, subdivision 25. 

    (c) A nursing facility's case mix payment rates for the 
 second and subsequent years of a facility's contract under this 
 section are the previous rate year's contract payment rates plus 
 an inflation adjustment.  The index for the inflation adjustment 
 must be based on the change in the Consumer Price Index-All 
 Items (United States City average) (CPI-U) forecasted by Data 
 Resources, Inc., as forecasted in the fourth quarter of the 
 calendar year preceding the rate year.  The inflation adjustment 
 must be based on the 12-month period from the midpoint of the 
 previous rate year to the midpoint of the rate year for which 
 the rate is being determined. 

    (d) The commissioner shall develop additional 
 incentive-based payments of up to five percent above the 
 standard contract rate for achieving outcomes specified in each 
 contract.  The specified facility-specific outcomes must be 
 measurable and approved by the commissioner.  The commissioner 
 may establish, for each contract, various levels of achievement 
 within an outcome.  After the outcomes have been specified the 
 commissioner shall assign various levels of payment associated 
 with achieving the outcome.  Any incentive-based payment cancels 
 if there is a termination of the contract.  In establishing the 
 specified outcomes and related criteria the commissioner shall 
 consider the following state policy objectives: 

    (1) improved cost effectiveness and quality of life as 
 measured by improved clinical outcomes; 

    (2) successful diversion or discharge to community 
 alternatives; 

    (3) decreased acute care costs; 

    (4) improved consumer satisfaction; 

    (5) the achievement of quality; or 

    (6) any additional outcomes proposed by a nursing facility 
 that the commissioner finds desirable. 

    Subd. 5.    Private pay rates.  (a) Notwithstanding 
 section 256B.48, subdivision 1, paragraph (a), the commissioner 
 shall determine the maximum private pay case mix payment rates 
 for nursing facilities that have entered into an alternative 
 payment demonstration contract under this section as specified 
 in this subdivision.  Nothing in this section shall limit the 
 exceptions for private pay rates authorized under section 
 256B.48, subdivision 1, paragraph (a). 

    (b) The maximum private pay rate for short-stay private 
 paying residents who are discharged from the facility less than 
 101 days after admission is an amount equal to the greater of 
 the Medicare payment rate for that facility or the resident's 
 medical assistance case mix payment rate.  For the first year of 
 an alternative payment demonstration project contract the 
 commissioner shall establish a maximum private paying rate for 
 short-stay residents that is based on a nursing facility's 
 estimated Medicare payment rate.  When actual Medicare final 
 rates are determined, the nursing facility shall retroactively 
 adjust a private paying resident's rates and provide a refund or 
 credit if the amount actually paid by the resident exceeds the 
 amount that would have been paid using Medicare rates. 

    (c) When a private paying resident is admitted, a nursing 
 facility shall determine, based on the resident's care plan, 
 whether the resident is likely to be discharged less than 101 
 days after admission.  If the resident is likely to be 
 discharged less than 101 days after admission, the nursing 
 facility may charge a short-stay private pay rate up to the 
 maximum specified in paragraph (b).  If the resident remains in 
 the facility for longer than 100 days, the facility shall 
 retroactively reduce the resident's payments to the maximum 
 long-term rate specified in subdivision 4 effective from the 
 date of admission and shall reimburse the resident for the 
 overpayment.  At the resident's option, the facility may 
 reimburse residents for overpayments by providing a refund or a 
 credit to be applied to future payments, or a combination of 
 both, subject to the facility's right to offset for past-due 
 payments.  If the facility determines, based on the care plan, 
 that the resident is likely to remain in the facility for longer 
 than 100 days, the facility shall not charge a private pay rate 
 greater than the maximum rate specified in subdivision 4. 

    (d) The provisions of paragraphs (b) and (c) do not apply 
 to short-stay residents admitted prior to the effective date of 
 a demonstration project contract. 

    Subd. 6.    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 the 
 alternative payment demonstration project, 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 in accordance 
 with the appeal decision.  

    Subd. 7.    Case mix assessments.  The commissioner may 
 allow a contract facility to develop and implement a case mix 
 assessment using the federal minimum data set resident 
 assessment. 

    Subd. 8.    Optional higher payments for first 100 days. 
  The commissioner may include in the contract with a nursing 
 facility under this section a higher rate for the first 100 days 
 after admission than for subsequent days.  The rate for the 
 subsequent days must be reduced so that the estimated total cost 
 to the medical assistance program will not exceed the estimated 
 cost without the differential payment rates. 

    Subd. 9.    Managed care contracts for other services.  
 Beginning July 1, 1995, the commissioner may contract with 
 nursing facilities that have entered into alternative payment 
 demonstration project contracts under this section to provide 
 medical assistance services other than nursing facility care to 
 residents of the facility under a prepaid, managed care payment 
 system.  Managed care contracts for other services may be 
 entered into at any time during the duration of a nursing 
 facility's alternative payment demonstration project contract, 
 and the terms of the managed care contracts need not coincide 
 with the terms of the alternative payment demonstration project 
 contract. 

    Subd. 10.    Exemptions.  (a) To the extent permitted by 
 federal law, (1) a facility that has entered into a contract 
 under this section is not required to file a cost report, as 
 defined in Minnesota Rules, part 9549.0020, subpart 13, for any 
 year after the base year that is the basis for the calculation 
 of the contract payment rate for the first rate year of the 
 alternative payment demonstration project contract; and (2) a 
 facility under contract is not subject to audits of historical 
 costs or revenues, or paybacks or retroactive adjustments based 
 on these costs or revenues, except audits, paybacks, or 
 adjustments relating to the cost report that is the basis for 
 calculation of the first rate year under the contract. 

    (b) A facility that is under contract with the commissioner 
 under this section is not subject to the moratorium on licensure 
 or certification of new nursing home beds in section 144A.071, 
 unless the project results in a net increase in bed capacity or 
 involves relocation of beds from one site to another.  Contract 
 payment rates must not be adjusted to reflect any additional 
 costs that a nursing facility incurs as a result of a 
 construction project undertaken under this paragraph.  In 
 addition, as a condition of entering into a contract under this 
 section, a nursing facility must agree that any future medical 
 assistance payments for nursing facility services will not 
 reflect any additional costs attributable to the sale of a 
 nursing facility under this section and to construction 
 undertaken under this paragraph that otherwise would not be 
 authorized under the moratorium in section 144A.073.  Nothing in 
 this section prevents a nursing facility participating in the 
 alternative payment demonstration project under this section 
 from seeking approval of an exception to the moratorium through 
 the process established in section 144A.073, and if approved the 
 facility's rates shall be adjusted to reflect the cost of the 
 project. 

    (c) Notwithstanding section 256B.48, subdivision 6, 
 paragraphs (c), (d), and (e), and pursuant to any terms and 
 conditions contained in the facility's contract, a nursing 
 facility that is under contract with the commissioner under this 
 section is in compliance with section 256B.48, subdivision 6, 
 paragraph (b), if the facility is Medicare certified. 

    (d) Notwithstanding paragraph (a), if by April 1, 1996, the 
 health care financing administration has not approved a required 
 waiver, or the health care financing administration otherwise 
 requires cost reports to be filed prior to the waiver's 
 approval, the commissioner shall require a cost report for the 
 rate year. 

    (e) A facility that is under contract with the commissioner 
 under this section shall be allowed to change therapy 
 arrangements from an unrelated vendor to a related vendor during 
 the term of the contract.  The commissioner may develop 
 reasonable requirements designed to prevent an increase in 
 therapy utilization for residents enrolled in the medical 
 assistance program. 

    Subd. 11.    Consumer protection.  As a condition of 
 entering into a contract under this section, a nursing facility 
 must agree to establish resident grievance procedures that are 
 similar to those required under section 256.045, subdivision 3.  
 The commissioner may also require nursing facilities to 
 establish expedited grievance procedures to resolve complaints 
 made by short-stay residents.  The facility must notify its 
 resident council of its intent to enter into a contract and must 
 consult with the council regarding any changes in operation 
 expected as a result of the contract. 

    Subd. 12.    Contracts are voluntary.  Participation of 
 nursing facilities in the alternative payment demonstration 
 project is voluntary.  The terms and procedures governing the 
 alternative payment demonstration project are determined under 
 this section and through negotiations between the commissioner 
 and nursing facilities that have submitted a letter of intent to 
 participate in the alternative demonstration project.  For 
 purposes of developing requests for proposals and contract 
 requirements, and negotiating the terms, conditions, and 
 requirements of contracts the commissioner is exempt from the 
 rulemaking requirements in chapter 14 until December 31, 2000. 

    Subd. 13.    Payment system reform advisory committee.  
 (a) The commissioner, in consultation with an advisory 
 committee, shall study options for reforming the regulatory and 
 reimbursement system for nursing facilities to reduce the level 
 of regulation, reporting, and procedural requirements, and to 
 provide greater flexibility and incentives to stimulate 
 competition and innovation.  The advisory committee shall 
 include, at a minimum, representatives from the long-term care 
 provider community, the department of health, and consumers of 
 long-term care services.  The advisory committee sunsets on June 
 30, 1997.  Among other things, the commissioner shall consider 
 the feasibility and desirability of changing from a 
 certification requirement to an accreditation requirement for 
 participation in the medical assistance program, options to 
 encourage early discharge of short-term residents through the 
 provision of intensive therapy, and further modifications needed 
 in rate equalization.  The commissioner shall also include 
 detailed recommendations for a permanent managed care payment 
 system to replace the contractual alternative payment 
 demonstration project authorized under this section.  The 
 commissioner shall submit a report with findings and 
 recommendations to the legislature by January 15, 1997. 

    (b) If a permanent managed care payment system has not been 
 enacted into law by July 1, 1997, the commissioner shall develop 
 and implement a transition plan to enable nursing facilities 
 under contract with the commissioner under this section to 
 revert to the cost-based payment system at the expiration of the 
 alternative payment demonstration project.  The commissioner 
 shall include in the alternative payment demonstration project 
 contracts entered into under this section a provision to permit 
 an amendment to the contract to be made after July 1, 1997, 
 governing the transition back to the cost-based payment system.  
 The transition plan and contract amendments are not subject to 
 rulemaking requirements. 

    Subd. 14.    Federal requirements.  The commissioner 
 shall implement the contractual alternative payment 
 demonstration project 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. 15.    External review panel.  The commissioner 
 may establish an external review panel consisting of persons 
 appointed by the commissioner for their expertise on issues 
 relating to nursing facility services, quality, payment systems, 
 and other matters, to advise the commissioner on the development 
 and implementation of the contractual alternative payment 
 demonstration project and to assist the commissioner in 
 assessing the quality of care provided and evaluating a 
 facility's compliance with performance standards specified in a 
 contract.  The external review panel must include, among other 
 members, representatives of nursing facilities. 

    Subd. 16.    Alternative contracts.  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. 

    Subd. 17.    Report.  The commissioner shall report to 
 the legislature by January 15, 1997, regarding the impact of the 
 alternative payment demonstration project.  In assessing the 
 impact, the commissioner may examine elements of the project 
 including consumer satisfaction, quality of care, adequacy of 
 services, timeliness in the delivery of services, and other 
 elements determined appropriate by the commissioner.  In 
 developing this report, the commissioner may involve appropriate 
 consumer advocate groups as needed to assist in monitoring and 
 evaluating changes in a nursing facility's behavior, including 
 the monitoring and evaluation of issues involving resident 
 protection.  The report must include recommendations for 
 reimbursement of nursing homes after June 30, 1997, based on 
 experience with the demonstration project. 

    HIST: 1995 c 207 art 7 s 32; 1996 c 451 art 5 s 28; 1997 c 187 
 art 4 s 8; 1997 c 203 art 3 s 10-12; art 9 s 11,12