2005 Minnesota Statutes

     256B.441 Value-based nursing facility reimbursement 
  system. 

    Subdivision 1.    Rate determination.  (a) The 
 commissioner shall establish a value-based nursing facility 
 reimbursement system which will provide facility-specific, 
 prospective rates for nursing facilities participating in the 
 medical assistance program.  The rates shall be determined using 
 an annual statistical and cost report filed by each nursing 
 facility.  The total payment rate shall be composed of four rate 
 components:  direct care services, support services, external 
 fixed, and property-related rate components.  The payment rate 
 shall be derived from statistical measures of actual costs 
 incurred in facility operation of nursing facilities.  From this 
 cost basis, the components of the total payment rate shall be 
 adjusted for quality of services provided, recognition of 
 staffing levels, geographic variation in labor costs, and 
 resident acuity. 

    (b) Rates shall be rebased annually.  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. 

    (c)  The commissioner shall begin to phase in the new 
 reimbursement system beginning October 1, 2007.  Full phase-in 
 shall be completed by October 1, 2011. 

    Subd. 2.    Definitions.  For purposes of this section, 
 the terms in subdivisions 3 to 42 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, 
 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, and 
 compliance with this section and generally accepted accounting 
 principles. 

    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, direct costs of raw 
 food (both normal and special diet food), dietary supplies, and 
 food preparation and serving.  Also included are special dietary 
 supplements used for tube feeding or oral feeding, such as 
 elemental high nitrogen diet, even if written as a prescription 
 item by a physician. 

    Subd. 11.    Direct care costs category.  "Direct care 
 costs category" means costs for nursing services, activities, 
 and social services. 

    Subd. 12.    Economic development regions.  "Economic 
 development regions" are as defined in section 462.385, 
 subdivision 1. 

    Subd. 13.    External fixed costs category.  "External 
 fixed costs category" 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.35; scholarships under section 256B.431, 
 subdivision 36; planned closure rate adjustments under section 
 256B.437; 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. 

    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.    Final rate.  "Final rate" means the rate 
 established after any adjustment by the commissioner, including, 
 but not limited to, adjustments resulting from audits. 

    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 and that are available to at least 
 all employees who work at least 20 hours per week. 

    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 cleaning and 
 lavatory supplies and contract services.  

    Subd. 21.    Labor-related portion.  The "labor-related 
 portion" of direct care costs and of support service costs shall 
 be that portion of costs that is attributable to wages for all 
 compensated hours, payroll taxes, and fringe benefits. 

    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 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.    Nursing costs.  "Nursing costs" means the 
 costs for the wages of nursing administration, staff education, 
 and direct care registered nurses, licensed practical nurses, 
 certified nursing assistants, and trained medication aides; 
 mental health workers and other direct care employees, and 
 associated fringe benefits and payroll taxes; services from a 
 supplemental nursing services agency and supplies that are 
 stocked at nursing stations or on the floor and distributed or 
 used individually, including:  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, and clinical reagents or similar diagnostic 
 agents, and drugs which are not paid on a separate fee schedule 
 by the medical assistance program or any other payer. 

    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.    Operating costs.  "Operating costs" means 
 costs associated with the direct care costs category and the 
 support services costs category. 

    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, called "peer groups," which shall 
 consist of: 

    (1) C&>NC/Short Stay/R80 - facilities that have three or 
 more admissions per bed per year, are hospital-attached, or are 
 licensed under Minnesota Rules, parts 9570.2000 to 9570.3600; 

    (2) boarding care homes - facilities that have more than 50 
 percent of their beds licensed as boarding care homes; and 

    (3) standard - all other facilities. 

    Subd. 31.    Prior rate-setting method.  "Prior 
 rate-setting method" means the rate determination process in 
 effect prior to October 1, 2006, under Minnesota Rules and 
 Minnesota Statutes. 

    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. 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, or to influence in any manner other than 
 through an arms length, legal transaction. 

    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. 

    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.    Support services costs category.  "Support 
 services costs category" means the costs for dietary, 
 housekeeping, laundry, maintenance, and administration. 

    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.    Operating payment rate for direct care and 
 support services.  The commissioner shall provide 
 recommendations to the legislature by February 15, 2006, on 
 specific methodology for the establishment of the operating 
 payment rate for direct care and support services under the new 
 system.  The recommendations must not increase expenditures for 
 the new payment system beyond the limits of the appropriation.  
 The commissioner shall include recommendations on options for 
 recognizing changes in staffing and services that may require a 
 supplemental appropriation in the future.  

    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. 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. 

    HIST: 1Sp2005 c 4 art 7 s 43