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2007 Minnesota Statutes

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256B.441 VALUE-BASED NURSING FACILITY REIMBURSEMENT SYSTEM.
    Subdivision 1. Rebasing of nursing facility operating cost payment rates. (a) The
commissioner shall rebase nursing facility operating cost payment rates to align payments to
facilities with the cost of providing care. The rebased operating cost payment rates shall be
calculated using the statistical and cost report filed by each nursing facility for the report period
ending one year prior to the rate year.
    (b) The new operating cost payment rates based on this section shall take effect beginning
with the rate year beginning October 1, 2008, and shall be phased in over eight rate years through
October 1, 2015.
    (c) Operating cost payment rates shall be rebased on October 1, 2016, and every two years
after that date.
    (d) Each cost reporting year shall begin on October 1 and end on the following September
30. Beginning in 2006, a statistical and cost report shall be filed by each nursing facility by
January 15. Notice of rates shall be distributed by August 15 and the rates shall go into effect
on October 1 for one year.
    (e) Effective October 1, 2014, property rates shall be rebased in accordance with section
256B.431 and Minnesota Rules, chapter 9549. The commissioner shall determine what the
property payment rate for a nursing facility would be had the facility not had its property rate
determined under section 256B.434. The commissioner shall allow nursing facilities to provide
information affecting this rate determination that would have been filed annually under Minnesota
Rules, chapter 9549, and nursing facilities shall report information necessary to determine
allowable debt. The commissioner shall use this information to determine the property payment
rate.
    Subd. 2. Definitions. For purposes of this section, the terms in subdivisions 3 to 42a have the
meanings given unless otherwise provided for in this section.
    Subd. 3. Active beds. "Active beds" means licensed beds that are not currently in layaway
status.
    Subd. 4. Activities costs. "Activities costs" means the costs for the salaries and wages of
the supervisor and other activities workers, associated fringe benefits and payroll taxes, supplies,
services, and consultants.
    Subd. 5. Administrative costs. "Administrative costs" means the direct costs for
administering the overall activities of the nursing home. These costs include salaries and wages
of the administrator, assistant administrator, business office employees, security guards, and
associated fringe benefits and payroll taxes, fees, contracts, or purchases related to business office
functions, licenses, and permits except as provided in the external fixed costs category, employee
recognition, travel including meals and lodging, training, voice and data communication or
transmission, office supplies, liability insurance and other forms of insurance not designated to
other areas, personnel recruitment, legal services, accounting services, management or business
consultants, data processing, information technology, Web site, central or home office costs,
business meetings and seminars, postage, fees for professional organizations, subscriptions,
security services, advertising, board of director's fees, working capital interest expense, and bad
debts and bad debt collection fees.
    Subd. 6. Allowed costs. "Allowed costs" means the amounts reported by the facility which
are necessary for the operation of the facility and the care of residents and which are reviewed by
the department for accuracy; reasonableness, in accordance with the requirements set forth in Title
XVIII of the federal Social Security Act and the interpretations in the provider reimbursement
manual; and compliance with this section and generally accepted accounting principles. All
references to costs in this section shall be assumed to refer to allowed costs.
    Subd. 7. Center for Medicare and Medicaid services. "Center for Medicare and Medicaid
services" means the federal agency, in the United States Department of Health and Human
Services that administers Medicaid, also referred to as "CMS."
    Subd. 8. Commissioner. "Commissioner" means the commissioner of human services
unless specified otherwise.
    Subd. 9. Desk audit. "Desk audit" means the establishment of the payment rate based
on the commissioner's review and analysis of required reports, supporting documentation, and
work sheets submitted by the nursing facility.
    Subd. 10. Dietary costs. "Dietary costs" means the costs for the salaries and wages of
the dietary supervisor, dietitians, chefs, cooks, dishwashers, and other employees assigned to
the kitchen and dining room, and associated fringe benefits and payroll taxes. Dietary costs
also includes the salaries or fees of dietary consultants, dietary supplies, and food preparation
and serving.
    Subd. 11. Direct care costs. "Direct care costs" means costs for the wages of nursing
administration, staff education, direct care registered nurses, licensed practical nurses, certified
nursing assistants, trained medication aides, and associated fringe benefits and payroll taxes;
services from a supplemental nursing services agency; supplies that are stocked at nursing
stations or on the floor and distributed or used individually, including, but not limited to: alcohol,
applicators, cotton balls, incontinence pads, disposable ice bags, dressings, bandages, water
pitchers, tongue depressors, disposable gloves, enemas, enema equipment, soap, medication cups,
diapers, plastic waste bags, sanitary products, thermometers, hypodermic needles and syringes,
clinical reagents or similar diagnostic agents, drugs that are not paid on a separate fee schedule by
the medical assistance program or any other payer, and technology related to the provision of
nursing care to residents, such as electronic charting systems.
    Subd. 12.[Repealed, 2007 c 147 art 7 s 76]
    Subd. 13. External fixed costs. "External fixed costs" means costs related to the nursing
home surcharge under section 256.9657, subdivision 1; licensure fees under section 144.122;
long-term care consultation fees under section 256B.0911, subdivision 6; family advisory council
fee under section 144A.33; scholarships under section 256B.431, subdivision 36; planned closure
rate adjustments under section 256B.436 or 256B.437; or single bed room incentives under
section 256B.431, subdivision 42; property taxes and property insurance; and PERA.
    Subd. 14. Facility average case mix index. "Facility average case mix index" or "CMI"
means a numerical value score that describes the relative resource use for all residents within
the groups under the resource utilization group (RUG-III) classification system prescribed by
the commissioner based on an assessment of each resident. The facility average CMI shall be
computed as the standardized days divided by total days for all residents in the facility. The
RUG's weights used in this section shall be as follows for each RUG's class: SE3 1.605; SE2
1.247; SE1 1.081; RAD 1.509; RAC 1.259; RAB 1.109; RAA 0.957; SSC 1.453; SSB 1.224;
SSA 1.047; CC2 1.292; CC1 1.200; CB2 1.086; CB1 1.017; CA2 0.908; CA1 0.834; IB2 0.877;
IB1 0.817; IA2 0.720; IA1 0.676; BB2 0.956; BB1 0.885; BA2 0.716; BA1 0.673; PE2 1.199;
PE1 1.104; PD2 1.023; PD1 0.948; PC2 0.926; PC1 0.860; PB2 0.786; PB1 0.734; PA2 0.691;
PA1 0.651; BC1 0.651; and DDF 1.000.
    Subd. 14a. Facility type groups. Facilities shall be classified into two groups, called "facility
type groups," which shall consist of:
    (1) C&NC/R80: facilities that are hospital-attached, or are licensed under Minnesota Rules,
parts 9570.2000 to 9570.3400; and
    (2) freestanding: all other facilities.
    Subd. 15. Field audit. "Field audit" means the examination, verification, and review of the
financial records, statistical records, and related supporting documentation on the nursing home
and any related organization.
    Subd. 16.[Repealed, 2007 c 147 art 7 s 76]
    Subd. 17. Fringe benefit costs. "Fringe benefit costs" means the costs for group life, health,
dental, workers' compensation, and other employee insurances and pension, profit-sharing, and
retirement plans for which the employer pays all or a portion of the costs.
    Subd. 18. Generally accepted accounting principles. "Generally Accepted Accounting
Principles" means the body of pronouncements adopted by the American Institute of Certified
Public Accountants regarding proper accounting procedures, guidelines, and rules.
    Subd. 19. Hospital-attached nursing facility status. (a) For the purpose of setting rates
under this section, for rate years beginning after September 30, 2006, "hospital-attached nursing
facility" means a nursing facility which meets the requirements of clauses (1) and (2); or (3); or
(4), or had hospital-attached status prior to January 1, 1995, and has been recognized as having
hospital-attached status by CMS continuously since that date:
(1) the nursing facility is recognized by the federal Medicare program to be a hospital-based
nursing facility;
(2) the hospital and nursing facility are physically attached or connected by a corridor;
(3) a nursing facility and hospital, which have applied for hospital-based nursing facility
status under the federal Medicare program during the reporting year, shall be considered a
hospital-attached nursing facility for purposes of setting payment rates under this section. The
nursing facility must file its cost report for that reporting 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 clauses (1) and (2). 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 according to this paragraph shall be recalculated treating the nursing facility as a
non-hospital-attached nursing facility;
(4) if a nonprofit or community-operated hospital and attached nursing facility suspend
operation of the hospital, the remaining nursing facility must be allowed to continue its status as
hospital-attached for rate calculations in the three rate years subsequent to the one in which the
hospital ceased operations.
(b) The nursing facility's cost report filed as hospital-attached facility shall use the same
cost allocation principles and methods used in the reports filed for the Medicare program.
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.
    Subd. 20. Housekeeping costs. "Housekeeping costs" means the costs for the salaries
and wages of the housekeeping supervisor, housekeepers, and other cleaning employees and
associated fringe benefits and payroll taxes. It also includes the cost of housekeeping supplies,
including, but not limited to, cleaning and lavatory supplies and contract services.
    Subd. 21.[Repealed, 2007 c 147 art 7 s 76]
    Subd. 22. Laundry costs. "Laundry costs" means the costs for the salaries and wages of
the laundry supervisor and other laundry employees, associated fringe benefits, and payroll
taxes. It also includes the costs of linen and bedding, the laundering of resident clothing, laundry
supplies, and contract services.
    Subd. 23. Licensee. "Licensee" means the individual or organization listed on the form
issued by the Minnesota Department of Health under chapter 144A or sections 144.50 to 144.56.
    Subd. 24. Maintenance and plant operations costs. "Maintenance and plant operations
costs" means the costs for the salaries and wages of the maintenance supervisor, engineers,
heating-plant employees, and other maintenance employees and associated fringe benefits and
payroll taxes. It also includes direct costs for maintenance and operation of the building and
grounds, including, but not limited to, fuel, electricity, medical waste and garbage removal, water,
sewer, supplies, tools, and repairs.
    Subd. 25. Normalized direct care costs per day. "Normalized direct care costs per day"
means direct care costs divided by standardized days. It is the costs per day for direct care services
associated with a RUG's index of 1.00.
    Subd. 26.[Repealed, 2007 c 147 art 7 s 76]
    Subd. 27. Nursing facility. "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. 28.[Repealed, 2007 c 147 art 7 s 76]
    Subd. 28a. Other direct care costs. "Other direct care costs" means the costs for the salaries
and wages and associated fringe benefits and payroll taxes of mental health workers, religious
personnel, and other direct care employees not specified in the definition of direct care costs.
    Subd. 29. Payroll taxes. "Payroll taxes" means the costs for the employer's share of the
FICA and Medicare withholding tax, and state and federal unemployment compensation taxes.
    Subd. 30. Peer groups. Facilities shall be classified into three groups by county. The groups
shall consist of:
    (1) group one: facilities in Anoka, Benton, Carlton, Carver, Chisago, Dakota, Dodge,
Goodhue, Hennepin, Isanti, Mille Lacs, Morrison, Olmsted, Ramsey, Rice, Scott, Sherburne, St.
Louis, Stearns, Steele, Wabasha, Washington, Winona, or Wright County;
    (2) group two: facilities in Aitkin, Beltrami, Blue Earth, Brown, Cass, Clay, Cook, Crow
Wing, Faribault, Fillmore, Freeborn, Houston, Hubbard, Itasca, Kanabec, Koochiching, Lake,
Lake of the Woods, Le Sueur, Martin, McLeod, Meeker, Mower, Nicollet, Norman, Pine, Roseau,
Sibley, Todd, Wadena, Waseca, Watonwan, or Wilkin County; and
    (3) group three: facilities in all other counties.
    Subd. 31. Prior system operating cost payment rate. "Prior system operating cost payment
rate" means the operating cost payment rate in effect on September 30, 2008, under Minnesota
Rules and Minnesota Statutes, not including planned closure rate adjustments under section
256B.436 or 256B.437, or single bed room incentives under section 256B.431, subdivision 42.
    Subd. 32. Private paying resident. "Private paying resident" means a nursing facility
resident who is not a medical assistance recipient and whose payment rate is not established by
another third party, including the veterans administration or Medicare.
    Subd. 33. Rate year. "Rate year" means the 12-month period beginning on October 1
following the second most recent reporting year.
    Subd. 33a. Raw food costs. "Raw food costs" means the cost of food provided to nursing
facility residents. Also included are special dietary supplements used for tube feeding or oral
feeding, such as elemental high nitrogen diet.
    Subd. 34. Related organization. "Related organization" means a person that furnishes goods
or services to a nursing facility and that is a close relative of a nursing facility, an affiliate of a
nursing facility, a close relative of an affiliate of a nursing facility, or an affiliate of a close relative
of an affiliate of a nursing facility. As used in this subdivision, paragraphs (a) to (d) apply:
    (a) "Affiliate" means a person that directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with another person.
    (b) "Person" means an individual, a corporation, a partnership, an association, a trust, an
unincorporated organization, or a government or political subdivision.
    (c) "Close relative of an affiliate of a nursing facility" means an individual whose relationship
by blood, marriage, or adoption to an individual who is an affiliate of a nursing facility is no
more remote than first cousin.
    (d) "Control" including the terms "controlling," "controlled by," and "under common control
with" means the possession, direct or indirect, of the power to direct or cause the direction of
the management, operations, or policies of a person, whether through the ownership of voting
securities, by contract, or otherwise.
    Subd. 35. Reporting period. "Reporting period" means the one-year period beginning on
October 1 and ending on the following September 30 during which incurred costs are accumulated
and then reported on the statistical and cost report.
    Subd. 36. Resident day or actual resident day. "Resident day" or "actual resident day"
means a day for which nursing services are rendered and billable, or a day for which a bed is held
and billed. The day of admission is considered a resident day, regardless of the time of admission.
The day of discharge is not considered a resident day, regardless of the time of discharge.
    Subd. 37. Salaries and wages. "Salaries and wages" means amounts earned by and paid to
employees or on behalf of employees to compensate for necessary services provided. Salaries and
wages include accrued vested vacation and accrued vested sick leave pay. Salaries and wages
must be paid within 30 days of the end of the reporting period in order to be allowable costs of
the reporting period.
    Subd. 38. Social services costs. "Social services costs" means the costs for the salaries and
wages of the supervisor and other social work employees, associated fringe benefits and payroll
taxes, supplies, services, and consultants. This category includes the cost of those employees who
manage and process admission to the nursing facility.
    Subd. 39. Stakeholders. "Stakeholders" means individuals and representatives of
organizations interested in long-term care, including nursing homes, consumers, and labor unions.
    Subd. 40. Standardized days. "Standardized days" means the sum of resident days by case
mix category multiplied by the RUG index for each category.
    Subd. 41. Statistical and cost report. "Statistical and cost report" means the forms supplied
by the commissioner for annual reporting of nursing facility expenses and statistics, including
instructions and definitions of items in the report.
    Subd. 42.[Repealed, 2007 c 147 art 7 s 76]
    Subd. 42a. Therapy costs. "Therapy costs" means any costs related to medical assistance
therapy services provided to residents that are not billed separately from the daily operating rate.
    Subd. 43. Reporting of statistical and cost information. (a) Beginning in 2006, all
nursing facilities shall provide information annually to the commissioner on a form and in a
manner determined by the commissioner. The commissioner may also require nursing facilities
to provide statistical and cost information for a subset of the items in the annual report on a
semiannual basis. Nursing facilities shall report only costs directly related to the operation of the
nursing facility. The facility shall not include costs which are separately reimbursed by residents,
medical assistance, or other payors. Allocations of costs from central, affiliated, or corporate
office and related organization transactions shall be reported according to section 256B.432.
The commissioner may grant to facilities one extension of up to 15 days for the filing of this
report if the extension is requested by December 15 and the commissioner determines that the
extension will not prevent the commissioner from establishing rates in a timely manner required
by law. The commissioner may separately require facilities to submit in a manner specified by
the commissioner documentation of statistical and cost information included in the report to
ensure accuracy in establishing payment rates and to perform audit and appeal review functions
under this section. Facilities shall retain all records necessary to document statistical and cost
information on the report for a period of no less than seven years. The commissioner may amend
information in the report according to subdivision 47. The commissioner may reject a report filed
by a nursing facility under this section if the commissioner determines that the report has been
filed in a form that is incomplete or inaccurate and the information is insufficient to establish
accurate payment rates. In the event that a complete report is not submitted in a timely manner,
the commissioner shall reduce the reimbursement payments to a nursing facility to 85 percent of
amounts due until the information is filed. The release of withheld payments shall be retroactive
for no more than 90 days. A nursing facility that does not submit a report or whose report is filed
in a timely manner but determined to be incomplete shall be given written notice that a payment
reduction is to be implemented and allowed ten days to complete the report prior to any payment
reduction. The commissioner may delay the payment withhold under exceptional circumstances
to be determined at the sole discretion of the commissioner.
(b) Nursing facilities may, within 12 months of the due date of a statistical and cost report,
file an amendment when errors or omissions in the annual statistical and cost report are discovered
and an amendment would result in a rate increase of at least 0.15 percent of the statewide weighted
average operating payment rate and shall, at any time, file an amendment which would result in a
rate reduction of at least 0.15 percent of the statewide weighted average operating payment rate.
The commissioner shall make retroactive adjustments to the total payment rate of a nursing
facility if an amendment is accepted. Where a retroactive adjustment is to be made as a result
of an amended report, audit findings, or other determination of an incorrect payment rate, the
commissioner may settle the payment error through a negotiated agreement with the facility and a
gross adjustment of the payments to the facility. Retroactive adjustments shall not be applied to
private pay residents. An error or omission for purposes of this item does not include a nursing
facility's determination that an election between permissible alternatives was not advantageous
and should be changed.
(c) If the commissioner determines that a nursing facility knowingly supplied inaccurate
or false information or failed to file an amendment to a statistical and cost report that resulted
in or would result in an overpayment, the commissioner shall immediately adjust the nursing
facility's payment rate and recover the entire overpayment. The commissioner may also terminate
the commissioner's agreement with the nursing facility and prosecute under applicable state
or federal law.
    Subd. 44. Calculation of a quality score. (a) The commissioner shall determine a quality
score for each nursing facility using quality measures established in section 256B.439, according
to methods determined by the commissioner in consultation with stakeholders and experts. These
methods shall be exempt from the rulemaking requirements under chapter 14.
(b) For each quality measure, a score shall be determined with a maximum number of
points available and number of points assigned as determined by the commissioner using the
methodology established according to this subdivision. The scores determined for all quality
measures shall be totaled. The determination of the quality measures to be used and the methods
of calculating scores may be revised annually by the commissioner.
(c) For the initial rate year under the new payment system, the quality measures shall include:
(1) staff turnover;
(2) staff retention;
(3) use of pool staff;
(4) quality indicators from the minimum data set; and
(5) survey deficiencies.
(d) For rate years beginning after October 1, 2006, when making revisions to the quality
measures or method for calculating scores, the commissioner shall publish the methodology in
the State Register at least 15 months prior to the start of the rate year for which the revised
methodology is to be used for rate-setting purposes. The quality score used to determine payment
rates shall be established for a rate year using data submitted in the statistical and cost report from
the associated reporting year, and using data from other sources related to a period beginning
no more than six months prior to the associated reporting year.
    Subd. 45.[Repealed, 2007 c 147 art 7 s 76]
    Subd. 46. Calculation of quality add-on. The payment rate for the quality add-on shall be a
variable amount based on each facility's quality score.
(a) For the rate year beginning October 1, 2006, the maximum quality add-on percent shall
be 2.4 percent and this add-on shall not be subject to a phase-in. The determination of the quality
score to be used in calculating the quality add-on for October 1, 2006, shall be based on a report
which must be filed with the commissioner, according to the requirements in subdivision 43, for
a six-month period ending January 31, 2006. This report shall be filed with the commissioner
by February 28, 2006. The commissioner shall prorate the six months of data to a full year.
When new quality measures are incorporated into the quality score methodology and when
existing quality measures are updated or improved, the commissioner may increase the maximum
quality add-on percent.
(b) For each facility, determine the operating payment rate.
(c) For each facility determine a ratio of the quality score of the facility determined in
subdivision 44, less 40 and then divided by 60. If this value is less than zero, use the value zero.
(d) For each facility, the quality add-on shall be the value determined in paragraph (b) times
the value determined in paragraph (c) times the maximum quality add-on percent.
    Subd. 46a. Calculation of quality add-on for the rate year beginning October 1, 2007. (a)
The payment rate for the rate year beginning October 1, 2007, for the quality add-on, is a variable
amount based on each facility's quality score. For the rate year, the maximum quality add-on is .3
percent of the operating payment rate in effect on September 30, 2007. The commissioner shall
determine the quality add-on for each facility according to paragraphs (b) to (d).
    (b) For each facility, the commissioner shall determine the operating payment rate in effect
on September 30, 2007.
    (c) For each facility, the commissioner shall determine a ratio of the quality score of the
facility determined in subdivision 44, subtract 40, and then divide by 60. If this value is less than
zero, the commissioner shall use the value zero.
    (d) For each facility, the quality add-on is the value determined in paragraph (b), multiplied
by the value determined in paragraph (c), multiplied by .3 percent.
    Subd. 47. Audit authority. (a) The commissioner may subject reports and supporting
documentation to desk and field audits to determine compliance with this section. Retroactive
adjustments shall be made as a result of desk or field audit findings if the cumulative impact of
the finding would result in a rate adjustment of at least 0.15 percent of the statewide weighted
average operating payment rate. If a field audit reveals inadequacies in a nursing facility's record
keeping or accounting practices, the commissioner may require the nursing facility to engage
competent professional assistance to correct those inadequacies within 90 days so that the field
audit may proceed.
(b) Field audits may cover the four most recent annual statistical and cost reports for which
desk audits have been completed and payment rates have been established. The field audit must
be an independent review of the nursing facility's statistical and cost report. All transactions,
invoices, or other documentation that support or relate to the statistics and costs claimed on
the annual statistical and cost reports are subject to review by the field auditor. If the provider
fails to provide the field auditor access to supporting documentation related to the information
reported on the statistical and cost report within the time period specified by the commissioner,
the commissioner shall calculate the total payment rate by disallowing the cost of the items for
which access to the supporting documentation is not provided.
(c) Changes in the total payment rate which result from desk or field audit adjustments to
statistical and cost reports for reporting years earlier than the four most recent annual cost reports
must be made to the four most recent annual statistical and cost reports, the current statistical and
cost report, and future statistical and cost reports to the extent that those adjustments affect the
total payment rate established by those reporting years.
(d) The commissioner shall extend the period for retention of records under subdivision 43
for purposes of performing field audits as necessary to enforce section 256B.48 with written
notice to the facility postmarked no later than 90 days prior to the expiration of the record
retention requirement.
    Subd. 48. Calculation of operating per diems. The direct care per diem for each facility
shall be the facility's direct care costs divided by its standardized days. The other care-related
per diem shall be the sum of the facility's activities costs, other direct care costs, raw food costs,
therapy costs, and social services costs, divided by the facility's resident days. The other operating
per diem shall be the sum of the facility's administrative costs, dietary costs, housekeeping costs,
laundry costs, and maintenance and plant operations costs divided by the facility's resident days.
    Subd. 49. Determination of total care-related per diem. The total care-related per diem for
each facility shall be the sum of the direct care per diem and the other care-related per diem.
    Subd. 50. Determination of total care-related limit. (a) The limit on the total care-related
per diem shall be determined for each peer group and facility type group combination. A facility's
total care-related per diems shall be limited to 120 percent of the median for the facility's peer
and facility type group. The facility-specific direct care costs used in making this comparison
and in the calculation of the median shall be based on a RUG's weight of 1.00. A facility that
is above that limit shall have its total care-related per diem reduced to the limit. If a reduction
of the total care-related per diem is necessary because of this limit, the reduction shall be made
proportionally to both the direct care per diem and the other care-related per diem.
    (b) Beginning with rates determined for October 1, 2016, the total care-related limit shall be
a variable amount based on each facility's quality score, as determined under section 256B.441,
subdivision 44
, in accordance with clauses (1) to (4):
    (1) for each facility, the commissioner shall determine the quality score, subtract 40, divide
by 40, and convert to a percentage;
    (2) if the value determined in clause (1) is less than zero, the total care-related limit shall be
105 percent of the median for the facility's peer and facility type group;
    (3) if the value determined in clause (1) is greater than 100 percent, the total care-related
limit shall be 125 percent of the median for the facility's peer and facility type group; and
    (4) if the value determined in clause (1) is greater than zero and less than 100 percent, the
total care-related limit shall be 105 percent of the median for the facility's peer and facility type
group plus one-fifth of the percentage determined in clause (1).
    Subd. 50a. Determination of proximity adjustments. For a nursing facility located in close
proximity to another nursing facility of the same facility group type but in a different peer group
and that has higher limits for care-related or other operating costs, the commissioner shall adjust
the limits in accordance with clauses (1) to (4):
    (1) determine the difference between the limits;
    (2) determine the distance between the two facilities, by the shortest driving route. If the
distance exceeds 20 miles, no adjustment shall be made;
    (3) subtract the value in clause (2) from 20 miles, divide by 20, and convert to a percentage;
and
    (4) increase the limits for the nursing facility with the lower limits by the value determined
in clause (1) multiplied by the value determined in clause (3).
    Subd. 51. Determination of other operating limit. The limit on the other operating per
diem shall be determined for each peer group. A facility's other operating per diem shall be
limited to 105 percent of the median for its peer group. A facility that is above that limit shall
have its other operating per diem reduced to the limit.
    Subd. 51a. Exception allowing contracting for specialized care. (a) For rate years
beginning on or after October 1, 2016, the commissioner may negotiate increases to the
care-related limit for nursing facilities that provide specialized care, at a cost to the general
fund not to exceed $600,000 per year. The commissioner shall publish a request for proposals
annually, and may negotiate increases to the limits that shall apply for either one or two years
before the increase shall be subject to a new proposal and negotiation. The care-related limit may
be increased by up to 50 percent.
    (b) In selecting facilities with which to negotiate, the commissioner shall consider:
    (1) the diagnoses or other circumstances of residents in the specialized program that require
care that costs substantially more than the RUG's rates associated with those residents;
    (2) the nature of the specialized program or programs offered to meet the needs of these
individuals; and
    (3) outcomes achieved by the specialized program.
    Subd. 52. Determination of efficiency incentive. Each facility shall be eligible for an
efficiency incentive based on its other operating per diem. A facility with an other operating
per diem that exceeds the limit in subdivision 51 shall receive no efficiency incentive. All
other facilities shall receive an incentive calculated as 50 percent times the difference between
the facility's other operating per diem and its other operating per diem limit, up to a maximum
incentive of $3.
    Subd. 53. Calculation of payment rate for external fixed costs. The commissioner shall
calculate a payment rate for external fixed costs.
    (a) For a facility licensed as a nursing home, the portion related to section 256.9657shall
be equal to $8.86. For a facility licensed as both a nursing home and a boarding care home, the
portion related to section 256.9657 shall be equal to $8.86 multiplied by the result of its number
of nursing home beds divided by its total number of licensed beds.
    (b) The portion related to the licensure fee under section 144.122, paragraph (d), shall be the
amount of the fee divided by actual resident days.
    (c) The portion related to scholarships shall be determined under section 256B.431,
subdivision 36.
    (d) The portion related to long-term care consultation shall be determined according to
section 256B.0911, subdivision 6.
    (e) The portion related to development and education of resident and family advisory
councils under section 144A.33 shall be $5 divided by 365.
    (f) The portion related to planned closure rate adjustments shall be as determined under
sections 256B.436 and 256B.437, subdivision 6. Planned closure rate adjustments that take effect
before October 1, 2014, shall no longer be included in the payment rate for external fixed costs
beginning October 1, 2016. Planned closure rate adjustments that take effect on or after October
1, 2014, shall no longer be included in the payment rate for external fixed costs beginning on
October 1 of the first year not less than two years after their effective date.
    (g) The portions related to property insurance, real estate taxes, special assessments, and
payments made in lieu of real estate taxes directly identified or allocated to the nursing facility
shall be the actual amounts divided by actual resident days.
    (h) The portion related to the Public Employees Retirement Association shall be actual costs
divided by resident days.
    (i) The single bed room incentives shall be as determined under section 256B.431,
subdivision 42. Single bed room incentives that take effect before October 1, 2014, shall no
longer be included in the payment rate for external fixed costs beginning October 1, 2016. Single
bed room incentives that take effect on or after October 1, 2014, shall no longer be included in
the payment rate for external fixed costs beginning on October 1 of the first year not less than
two years after their effective date.
    (j) The payment rate for external fixed costs shall be the sum of the amounts in paragraphs
(a) to (i).
    Subd. 54. Determination of total payment rates. In rate years when rates are rebased, the
total payment rate for a RUG's weight of 1.00 shall be the sum of the total care-related payment
rate, other operating payment rate, efficiency incentive, external fixed cost rate, and the property
rate determined under section 256B.434. To determine a total payment rate for each RUG's level,
the total care-related payment rate shall be divided into the direct care payment rate and the other
care-related payment rate, and the direct care payment rate multiplied by the RUG's weight for
each RUG's level using the weights in subdivision 14.
    Subd. 55. Phase-in of rebased operating cost payment rates. (a) For the rate years
beginning October 1, 2008, to October 1, 2012, the operating cost payment rate calculated
under this section shall be phased in by blending the operating cost rate with the operating cost
payment rate determined under section 256B.434. For the rate year beginning October 1, 2008,
the operating cost payment rate for each facility shall be 13 percent of the operating cost payment
rate from this section, and 87 percent of the operating cost payment rate from section 256B.434.
For the rate year beginning October 1, 2009, the operating cost payment rate for each facility
shall be 14 percent of the operating cost payment rate from this section, and 86 percent of the
operating cost payment rate from section 256B.434. For the rate year beginning October 1, 2010,
the operating cost payment rate for each facility shall be 14 percent of the operating cost payment
rate from this section, and 86 percent of the operating cost payment rate from section 256B.434.
For the rate year beginning October 1, 2011, the operating cost payment rate for each facility
shall be 31 percent of the operating cost payment rate from this section, and 69 percent of the
operating cost payment rate from section 256B.434. For the rate year beginning October 1, 2012,
the operating cost payment rate for each facility shall be 48 percent of the operating cost payment
rate from this section, and 52 percent of the operating cost payment rate from section 256B.434.
For the rate year beginning October 1, 2013, the operating cost payment rate for each facility
shall be 65 percent of the operating cost payment rate from this section, and 35 percent of the
operating cost payment rate from section 256B.434. For the rate year beginning October 1, 2014,
the operating cost payment rate for each facility shall be 82 percent of the operating cost payment
rate from this section, and 18 percent of the operating cost payment rate from section 256B.434.
For the rate year beginning October 1, 2015, the operating cost payment rate for each facility shall
be the operating cost payment rate determined under this section. The blending of operating cost
payment rates under this section shall be performed separately for each RUG's class.
    (b) A portion of the funds received under this subdivision that are in excess of operating
cost payment rates that a facility would have received under section 256B.434, as determined
in accordance with clauses (1) to (3), shall be subject to the requirements in section 256B.434,
subdivision 19
, paragraphs (b) to (h).
    (1) Determine the amount of additional funding available to a facility, which shall be equal
to total medical assistance resident days from the most recent reporting year times the difference
between the blended rate determined in paragraph (a) for the rate year being computed and
the blended rate for the prior year.
    (2) Determine the portion of all operating costs, for the most recent reporting year, that are
compensation related. If this value exceeds 75 percent, use 75 percent.
    (3) Subtract the amount determined in clause (2) from 75 percent.
    (4) The portion of the fund received under this subdivision that shall be subject to the
requirements in section 256B.434, subdivision 19, paragraphs (b) to (h), shall equal the amount
determined in clause (1) times the amount determined in clause (3).
    Subd. 56. Hold harmless. For the rate years beginning October 1, 2008, to October 1,
2016, no nursing facility shall receive an operating cost payment rate less than its operating cost
payment rate under section 256B.434. The comparison of operating cost payment rates under this
section shall be made for a RUG's rate with a weight of 1.00.
    Subd. 57. Appeals. Nursing facilities may appeal, as described under section 256B.50, the
determination of a payment rate established under this chapter.
    Subd. 58. Implementation delay. Within six months prior to the effective date of (1)
rebasing of property payment rates under subdivision 1; (2) quality-based rate limits under
subdivision 50; and (3) the removal of planned closure rate adjustments and single bed room
incentives from external fixed costs under subdivision 53, the commissioner shall compare the
average operating cost for all facilities combined from the most recent cost reports to the average
medical assistance operating payment rates for all facilities combined from the same time period.
Each provision shall not go into effect until the average medical assistance operating payment rate
is at least 92 percent of the average operating cost.
History: 1Sp2005 c 4 art 7 s 43; 2006 c 212 art 3 s 21; 2007 c 147 art 7 s 25-57

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