1.1 	A bill for an act
1.2 	relating to human services; recodifying nursing facility payment language; 
1.3 	making conforming changes; repealing obsolete provisions; amending 
1.4 	Minnesota Statutes 2014, sections 144A.071, subdivision 2; 256B.0625, by 
1.5 	adding a subdivision; 256B.19, subdivision 1e; 256B.431, subdivision 22; 
1.6 	256B.434, subdivision 10; 256B.48, subdivisions 2, 3a; 256B.50, subdivision 1a; 
1.7 	Minnesota Statutes 2015 Supplement, sections 144A.15, subdivision 6; 256I.05, 
1.8 	subdivision 2; proposing coding for new law as Minnesota Statutes, chapter 
1.9 	256R; repealing Minnesota Statutes 2014, sections 256B.0911, subdivision 7; 
1.10 	256B.25, subdivision 4; 256B.27, subdivision 2a; 256B.41, subdivisions 1, 2, 3; 
1.11 	256B.411, subdivisions 1, 2; 256B.421, subdivisions 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 
1.12 	12, 13, 14, 15; 256B.431, subdivisions 1, 2d, 2e, 2n, 2r, 2s, 2t, 3e, 32, 35, 42, 44; 
1.13 	256B.432, subdivisions 1, 2, 3, 4, 4a, 5, 6, 6a, 7, 8; 256B.433, subdivisions 1, 2, 
1.14 	3, 3a; 256B.434, subdivisions 2, 9, 11, 12, 14, 15, 16, 18, 19a, 20, 21; 256B.437, 
1.15 	subdivisions 1, 3, 4, 5, 6, 7, 9, 10; 256B.438, subdivisions 1, 2, 3, 4, 5, 6, 7, 8; 
1.16 	256B.441, subdivisions 2, 3, 4, 7, 8, 9, 10, 11, 15, 18, 20, 22, 23, 24, 25, 27, 
1.17 	28a, 29, 32, 33a, 34, 36, 37, 38, 39, 41, 42a, 43, 46b, 47, 49, 57, 59, 60, 61, 64; 
1.18 	256B.47, subdivisions 1, 2, 3, 4; 256B.48, subdivisions 1, 1a, 1b, 1c, 3, 4, 5, 6a, 
1.19 	7, 8; Minnesota Statutes 2015 Supplement, sections 256B.431, subdivisions 2b, 
1.20 	36; 256B.441, subdivisions 1, 5, 6, 11a, 13, 14, 17, 30, 31, 33, 35, 40, 44, 46c, 
1.21 	46d, 48, 50, 51, 51a, 51b, 53, 54, 55a, 56, 63, 65, 66, 67; 256B.495, subdivisions 
1.22 	1, 5; Minnesota Rules, parts 9549.0035, subparts 1, 3, 7, 8; 9549.0041, subpart 6; 
1.23 	9549.0055, subparts 1, 2, 3; 9549.0070, subparts 2, 3.
1.24 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.25 	ARTICLE 1
1.26 	NURSING FACILITY RECODIFICATION
1.27 	GENERAL

1.28 	Section 1. [256R.01] GENERAL.
2.1 		Subdivision 1.Payment rates. Payment rates paid to any nursing facility receiving 
2.2 	medical assistance payments must be those rates established pursuant to this chapter 
2.3 	and rules adopted under it.
2.4 		Subd. 2.Authority of commissioner. The commissioner shall establish, by rule, 
2.5 	procedures for determining rates for care of residents of nursing facilities which qualify as 
2.6 	vendors of medical assistance, and for implementing the provisions of this chapter and 
2.7 	section 256B.50. The procedures shall specify the costs that are allowable for establishing 
2.8 	payment rates through medical assistance.
2.9 		Subd. 3.Compliance with federal requirements. If any provision of this chapter 
2.10 	and section 256B.50 is determined by the United States government to be in conflict with 
2.11 	existing or future requirements of the United States government with respect to federal 
2.12 	participation in medical assistance, the federal requirements shall prevail.

2.13 	EFFECTIVE DATE. The grant of rulemaking authority to the commissioner 
2.14 	of human services in this section is a continuation of authority previously granted in 
2.15 	Minnesota Statutes, section 256B.41, subdivision 1.

2.16 	Sec. 2. [256R.02] DEFINITIONS.
2.17 		Subdivision 1.Application. For purposes of this chapter, the terms in this section 
2.18 	have the meanings given unless otherwise provided for in this chapter.
2.19 		Subd. 2.Active beds. "Active beds" means licensed beds that are not currently 
2.20 	in layaway status.
2.21 		Subd. 3.Activities costs. "Activities costs" means the costs for the salaries and 
2.22 	wages of the supervisor and other activities workers, associated fringe benefits and payroll 
2.23 	taxes, supplies, services, and consultants.
2.24 		Subd. 4.Administrative costs. "Administrative costs" means the identifiable 
2.25 	costs for administering the overall activities of the nursing home. These costs include 
2.26 	salaries and wages of the administrator, assistant administrator, business office employees, 
2.27 	security guards, and associated fringe benefits and payroll taxes, fees, contracts, or 
2.28 	purchases related to business office functions, licenses, and permits except as provided 
2.29 	in the external fixed costs category, employee recognition, travel including meals and 
2.30 	lodging, all training except as specified in subdivision 17, voice and data communication 
2.31 	or transmission, office supplies, property and liability insurance and other forms of 
2.32 	insurance not designated to other areas, personnel recruitment, legal services, accounting 
2.33 	services, management or business consultants, data processing, information technology, 
2.34 	Web site, central or home office costs, business meetings and seminars, postage, fees for 
3.1 	professional organizations, subscriptions, security services, advertising, board of directors 
3.2 	fees, working capital interest expense, and bad debts and bad debt collection fees.
3.3 		Subd. 5.Allowed costs.  "Allowed costs" means the amounts reported by the facility 
3.4 	which are necessary for the operation of the facility and the care of residents and which 
3.5 	are reviewed by the Department of Human Services for accuracy; reasonableness, in 
3.6 	accordance with the requirements set forth in title XVIII of the federal Social Security 
3.7 	Act and the interpretations in the provider reimbursement manual; and compliance with 
3.8 	this chapter and generally accepted accounting principles. All references to costs in this 
3.9 	chapter shall be assumed to refer to allowed costs, unless otherwise specified.
3.10 		Subd. 6.Applicable credit. "Applicable credit" means a receipt or expense 
3.11 	reduction as a result of a purchase discount, rebate, refund, allowance, public grant, 
3.12 	beauty shop income, guest meals income, adjustment for overcharges, insurance claims 
3.13 	settlement, recovered bad debts, or any other adjustment or income reducing the costs 
3.14 	claimed by a nursing facility.
3.15 		Subd. 7.Assessment reference date.  "Assessment reference date" has the meaning 
3.16 	given in section 144.0724, subdivision 2, paragraph (a).
3.17 		Subd. 8.Capital assets. "Capital assets" means a nursing facility's buildings, 
3.18 	attached fixtures, land improvements, leasehold improvements, and all additions to or 
3.19 	replacements of those assets used directly for resident care.
3.20 		Subd. 9.Case mix classification. "Case mix classification" refers to resident 
3.21 	reimbursement case mix classifications described in section 144.0724.
3.22 		Subd. 10.Case mix index.  "Case mix index" has the meaning given in section 
3.23 	144.0724, subdivision 2, paragraph (b).
3.24 		Subd. 11.Centers for Medicare and Medicaid services. "Centers for Medicare 
3.25 	and Medicaid services" means the federal agency, in the United States Department of 
3.26 	Health and Human Services that administers Medicaid, also referred to as "CMS."
3.27 		Subd. 12.Commissioner. "Commissioner" means the commissioner of human 
3.28 	services unless specified otherwise.
3.29 		Subd. 13.Consulting agreement.  "Consulting agreement" means any agreement 
3.30 	the purpose of which is for a central, affiliated, or corporate office to advise, counsel, 
3.31 	recommend, or suggest to the owner or operator of the nonrelated nursing facility 
3.32 	measures and methods for improving the operations of the nursing facility.
3.33 		Subd. 14.Cost to limit ratio. "Cost to limit ratio" means a facility's total 
3.34 	care-related cost per day divided by its total care-related payment rate limit.
4.1 		Subd. 15.Desk audit. "Desk audit" means the establishment of the payment 
4.2 	rate based on the commissioner's review and analysis of required reports, supporting 
4.3 	documentation, and work sheets submitted by the nursing facility.
4.4 		Subd. 16.Dietary costs. "Dietary costs" means the costs for the salaries and wages 
4.5 	of the dietary supervisor, dietitians, chefs, cooks, dishwashers, and other employees 
4.6 	assigned to the kitchen and dining room, and associated fringe benefits and payroll taxes. 
4.7 	Dietary costs also includes the salaries or fees of dietary consultants, dietary supplies, 
4.8 	and food preparation and serving.
4.9 		Subd. 17.Direct care costs. "Direct care costs" means costs for the wages of 
4.10 	nursing administration, direct care registered nurses, licensed practical nurses, certified 
4.11 	nursing assistants, trained medication aides, employees conducting training in resident 
4.12 	care topics and associated fringe benefits and payroll taxes; services from a supplemental 
4.13 	nursing services agency; supplies that are stocked at nursing stations or on the floor and 
4.14 	distributed or used individually, including, but not limited to: alcohol, applicators, cotton 
4.15 	balls, incontinence pads, disposable ice bags, dressings, bandages, water pitchers, tongue 
4.16 	depressors, disposable gloves, enemas, enema equipment, soap, medication cups, diapers, 
4.17 	plastic waste bags, sanitary products, thermometers, hypodermic needles and syringes, 
4.18 	clinical reagents or similar diagnostic agents, drugs that are not paid on a separate fee 
4.19 	schedule by the medical assistance program or any other payer, and technology related 
4.20 	to the provision of nursing care to residents, such as electronic charting systems; costs 
4.21 	of materials used for resident care training, and training courses outside of the facility 
4.22 	attended by direct care staff on resident care topics.
4.23 		Subd. 18.Employer health insurance costs. "Employer health insurance costs" 
4.24 	means premium expenses for group coverage and reinsurance, actual expenses incurred 
4.25 	for self-insured plans, and employer contributions to employee health reimbursement and 
4.26 	health savings accounts. Premium and expense costs and contributions are allowable for 
4.27 	(1) all employees and (2) the spouse and dependents of employees who meet the definition 
4.28 	of full-time employees under the federal Affordable Care Act, Public Law 111-148.
4.29 		Subd. 19.External fixed costs. "External fixed costs" means costs related to the 
4.30 	nursing home surcharge under section 256.9657, subdivision 1; licensure fees under 
4.31 	section 144.122; family advisory council fee under section 144A.33; scholarships under 
4.32 	section 256R.37; planned closure rate adjustments under section 256R.40; single-bed 
4.33 	room incentives under section 256R.41; property taxes, assessments, and payments in 
4.34 	lieu of taxes; employer health insurance costs; quality improvement incentive payment 
4.35 	rate adjustments under section 256R.39; performance-based incentive payments under 
5.1 	section 256R.38; special dietary needs under section 256R.51; and Public Employees 
5.2 	Retirement Association.
5.3 		Subd. 20.Facility average case mix index. "Facility average case mix index" 
5.4 	or "CMI" means a numerical score that describes the relative resource use for all 
5.5 	residents within the case mix classifications under the resource utilization group (RUG) 
5.6 	classification system prescribed by the commissioner based on an assessment of each 
5.7 	resident. The facility average CMI shall be computed as the standardized days divided 
5.8 	by the sum of the facility's resident days. The case mix indices used shall be based on 
5.9 	the system prescribed in section 256R.17.
5.10 		Subd. 21.Field audit. "Field audit" means the examination, verification, and review 
5.11 	of the financial records, statistical records, and related supporting documentation on the 
5.12 	nursing home and any related organization.
5.13 		Subd. 22.Fringe benefit costs. "Fringe benefit costs" means the costs for group life, 
5.14 	dental, workers' compensation, and other employee insurances and pension, except for 
5.15 	the Public Employees Retirement Association and employer health insurance costs; profit 
5.16 	sharing; and retirement plans for which the employer pays all or a portion of the costs.
5.17 		Subd. 23.Generally accepted accounting principles. "Generally accepted 
5.18 	accounting principles" means the body of pronouncements adopted by the American 
5.19 	Institute of Certified Public Accountants regarding proper accounting procedures, 
5.20 	guidelines, and rules.
5.21 		Subd. 24.Housekeeping costs. "Housekeeping costs" means the costs for the 
5.22 	salaries and wages of the housekeeping supervisor, housekeepers, and other cleaning 
5.23 	employees and associated fringe benefits and payroll taxes. It also includes the cost of 
5.24 	housekeeping supplies, including, but not limited to, cleaning and lavatory supplies and 
5.25 	contract services.
5.26 		Subd. 25.Identifiable cost. "Identifiable cost" means a cost that can be directly 
5.27 	identified with a specific nursing facility or can be directly identified with an activity or 
5.28 	function.
5.29 		Subd. 26.Laundry costs. "Laundry costs" means the costs for the salaries and 
5.30 	wages of the laundry supervisor and other laundry employees, associated fringe benefits, 
5.31 	and payroll taxes. It also includes the costs of linen and bedding, the laundering of 
5.32 	resident clothing, laundry supplies, and contract services.
5.33 		Subd. 27.Leave day. "Leave day" means any calendar day during which the 
5.34 	recipient leaves the facility and is absent overnight, and all subsequent, consecutive 
5.35 	calendar days. An overnight absence from the facility of less than 23 hours does 
5.36 	not constitute a leave day. Nevertheless, if the recipient is absent from the facility 
6.1 	to participate in active programming of the facility under the personal direction and 
6.2 	observation of facility staff, the day shall not be considered a leave day regardless of the 
6.3 	number of hours of the recipient's absence. For purposes of this subdivision, "calendar 
6.4 	day" means the 24-hour period ending at midnight.
6.5 		Subd. 28.Licensee. "Licensee" means the individual or organization listed on the 
6.6 	form issued by the Minnesota Department of Health under chapter 144A or sections 
6.7 	144.50 to 144.56.
6.8 		Subd. 29.Maintenance and plant operations costs. "Maintenance and plant 
6.9 	operations costs" means the costs for the salaries and wages of the maintenance supervisor, 
6.10 	engineers, heating-plant employees, and other maintenance employees and associated 
6.11 	fringe benefits and payroll taxes. It also includes identifiable costs for maintenance and 
6.12 	operation of the building and grounds, including, but not limited to, fuel, electricity, 
6.13 	medical waste and garbage removal, water, sewer, supplies, tools, and repairs.
6.14 		Subd. 30.Management agreement.  "Management agreement" means an agreement 
6.15 	in which one or more of the following criteria exist:
6.16 	(1) the central, affiliated, or corporate office has or is authorized to assume 
6.17 	day-to-day operational control of the nursing facility for any six-month period within a 
6.18 	24-month period. "Day-to-day operational control" means that the central, affiliated, or 
6.19 	corporate office has the authority to require, mandate, direct, or compel the employees 
6.20 	of the nursing facility to perform or refrain from performing certain acts, or to supplant 
6.21 	or take the place of the top management of the nursing facility. "Day-to-day operational 
6.22 	control" includes the authority to hire or terminate employees or to provide an employee 
6.23 	of the central, affiliated, or corporate office to serve as administrator of the nursing facility; 
6.24 	(2) the central, affiliated, or corporate office performs or is authorized to perform 
6.25 	two or more of the following: the execution of contracts; authorization of purchase 
6.26 	orders; signature authority for checks, notes, or other financial instruments; requiring the 
6.27 	nursing facility to use the group or volume purchasing services of the central, affiliated, 
6.28 	or corporate office; or the authority to make annual capital expenditures for the nursing 
6.29 	facility exceeding $50,000, or $500 per licensed bed, whichever is less, without first 
6.30 	securing the approval of the nursing facility board of directors;
6.31 	(3) the central, affiliated, or corporate office becomes or is required to become the 
6.32 	licensee under applicable state law;
6.33 	(4) the agreement provides that the compensation for services provided under the 
6.34 	agreement is directly related to any profits made by the nursing facility; or
7.1 	(5) the nursing facility entering into the agreement is governed by a governing body 
7.2 	that meets fewer than four times per year, that does not publish notice of its meetings, 
7.3 	or that does not keep formal records of its proceedings.
7.4 		Subd. 31.Medical assistance program. "Medical assistance program" means the 
7.5 	program which reimburses the cost of health care provided to eligible recipients pursuant 
7.6 	to chapters 256B and 256R, and United States Code, title 42, section 1396, et seq.
7.7 		Subd. 32.Minimum data set.  "Minimum data set" has the meaning given in section 
7.8 	144.0724, subdivision 2, paragraph (d).
7.9 		Subd. 33.Nursing facility. "Nursing facility" means a facility with a medical 
7.10 	assistance provider agreement that is licensed as a nursing home under chapter 144A or 
7.11 	as a boarding care home under sections 144.50 to 144.56.
7.12 		Subd. 34.Other care-related costs. "Other care-related costs" means the sum of 
7.13 	activities costs, other direct care costs, raw food costs, therapy costs, and social services 
7.14 	costs.
7.15 		Subd. 35.Other direct care costs. "Other direct care costs" means the costs 
7.16 	for the salaries and wages and associated fringe benefits and payroll taxes of mental 
7.17 	health workers, religious personnel, and other direct care employees not specified in 
7.18 	the definition of direct care costs.
7.19 		Subd. 36.Other operating costs. "Other operating costs" means the sum of 
7.20 	administrative costs, dietary costs, housekeeping costs, laundry costs, and maintenance 
7.21 	and plant operation costs.
7.22 		Subd. 37.Payroll taxes. "Payroll taxes" means the costs for the employer's 
7.23 	share of the FICA and Medicare withholding tax, and state and federal unemployment 
7.24 	compensation taxes.
7.25 		Subd. 38.Prior system operating cost payment rate. "Prior system operating 
7.26 	cost payment rate" means the operating cost payment rate in effect on December 31, 
7.27 	2015, under Minnesota Rules and Minnesota Statutes, inclusive of health insurance, plus 
7.28 	property insurance costs from external fixed costs, minus any rate increases allowed under 
7.29 	Minnesota Statutes 2015 Supplement, section 256B.441, subdivision 55a.
7.30 		Subd. 39.Private paying resident. "Private paying resident" means a nursing 
7.31 	facility resident who is not a medical assistance recipient and whose payment rate is not 
7.32 	established by another third party, including the veterans administration or Medicare.
7.33 		Subd. 40.Public accountant. "Public accountant" means a certified public 
7.34 	accountant or certified public accounting firm licensed in accordance with chapter 326A.
7.35 		Subd. 41.Rate year. "Rate year" means the 12-month period beginning on January 1.
8.1 		Subd. 42.Raw food costs. "Raw food costs" means the cost of food provided to 
8.2 	nursing facility residents. Also included are special dietary supplements used for tube 
8.3 	feeding or oral feeding, such as elemental high nitrogen diet.
8.4 		Subd. 43.Related organization. (a) "Related organization" means a person that 
8.5 	furnishes goods or services to a nursing facility and that is a close relative of a nursing 
8.6 	facility, an affiliate of a nursing facility, a close relative of an affiliate of a nursing facility, 
8.7 	or an affiliate of a close relative of an affiliate of a nursing facility. As used in this 
8.8 	subdivision, paragraphs (b) to (e) apply.
8.9 	(b) "Affiliate" means a person that directly, or indirectly through one or more 
8.10 	intermediaries, controls or is controlled by, or is under common control with another person.
8.11 	(c) "Person" means an individual, a corporation, a partnership, an association, a trust, 
8.12 	an unincorporated organization, or a government or political subdivision.
8.13 	(d) "Close relative of an affiliate of a nursing facility" means an individual whose 
8.14 	relationship by blood, marriage, or adoption to an individual who is an affiliate of a 
8.15 	nursing facility is no more remote than first cousin.
8.16 	(e) "Control" including the terms "controlling," "controlled by," and "under common 
8.17 	control with" means the possession, direct or indirect, of the power to direct or cause the 
8.18 	direction of the management, operations, or policies of a person, whether through the 
8.19 	ownership of voting securities, by contract, or otherwise.
8.20 		Subd. 44.Reporting period. "Reporting period" means the one-year period 
8.21 	beginning on October 1 and ending on the following September 30 during which incurred 
8.22 	costs are accumulated and then reported on the statistical and cost report. If a facility is 
8.23 	reporting for an interim or settle-up period, the reporting period beginning date may be a 
8.24 	date other than October 1. An interim or settle-up report must cover at least five months, 
8.25 	but no more than 17 months, and must always end on September 30.
8.26 		Subd. 45.Resident day. "Resident day" means a day for which nursing services are 
8.27 	rendered and billable, or a day for which a bed is held and billed. The day of admission is 
8.28 	considered a resident day, regardless of the time of admission. The day of discharge is not 
8.29 	considered a resident day, regardless of the time of discharge.
8.30 		Subd. 46.Resource utilization group.  "Resource utilization groups" or "RUG" has 
8.31 	the meaning given in section 144.0724, subdivision 2, paragraph (f).
8.32 		Subd. 47.Salaries and wages. "Salaries and wages" means amounts earned by and 
8.33 	paid to employees or on behalf of employees to compensate for necessary services provided. 
8.34 	Salaries and wages include accrued vested vacation and accrued vested sick leave pay.
8.35 		Subd. 48.Social services costs. "Social services costs" means the costs for the 
8.36 	salaries and wages of the supervisor and other social work employees, associated fringe 
9.1 	benefits and payroll taxes, supplies, services, and consultants. This category includes the 
9.2 	cost of those employees who manage and process admission to the nursing facility.
9.3 		Subd. 49.Stakeholders. "Stakeholders" means individuals and representatives of 
9.4 	organizations interested in long-term care, including nursing homes, consumers, and 
9.5 	labor unions.
9.6 		Subd. 50.Standardized days. "Standardized days" means the sum of resident days 
9.7 	by case mix classification multiplied by the case mix index for each classification. When a 
9.8 	facility has resident days at a penalty classification, these days shall be reported as resident 
9.9 	days at the case mix classification established immediately after the penalty period, if 
9.10 	available, and otherwise, at the case mix classification in effect before the penalty began.
9.11 		Subd. 51.Statistical and cost report. "Statistical and cost report" means the forms 
9.12 	supplied by the commissioner for annual reporting of nursing facility expenses and 
9.13 	statistics, including instructions and definitions of items in the report.
9.14 		Subd. 52.Therapy costs. "Therapy costs" means any costs related to medical 
9.15 	assistance therapy services provided to residents that are not billed separately from the 
9.16 	daily operating rate.
9.17 		Subd. 53.Working capital debt. "Working capital debt" means debt incurred 
9.18 	to finance nursing facility operating costs. Working capital debt does not include debt 
9.19 	incurred to acquire or refinance a capital asset.
9.20 		Subd. 54.Working capital interest expense. "Working capital interest expense" 
9.21 	means the interest expense incurred on working capital debt during the reporting period.
9.22 	CONDITIONS FOR PARTICIPATION

9.23 	Sec. 3. [256R.03] CONDITIONS FOR FUNDING.
9.24 		Subdivision 1.Requirements for funding. (a) No medical assistance payments 
9.25 	shall be made to any nursing facility unless the nursing facility is certified to participate 
9.26 	in the medical assistance program under title XIX of the federal Social Security Act and 
9.27 	has in effect a provider agreement with the commissioner meeting the requirements of 
9.28 	state and federal statutes and rules.
9.29 	(b) No medical assistance payments shall be made to any nursing facility unless 
9.30 	the nursing facility complies with all requirements of Minnesota Statutes including, but 
9.31 	not limited to, this chapter and chapter 256B and rules adopted under them that govern 
9.32 	participation in the program.
9.33 	(c) Subject to exceptions in section 256B.25, subdivision 3, no nursing facility may 
9.34 	receive any state or local payment for providing care to a person eligible for medical 
9.35 	assistance, except under the medical assistance program.
10.1 		Subd. 2.Payment during suspended admissions. A nursing home or boarding 
10.2 	care home that has received a notice to suspend admissions under section 144A.105 shall 
10.3 	be ineligible to receive payment for admissions that occur during the effective dates of the 
10.4 	suspension. Upon termination of the suspension by the commissioner of health, payments 
10.5 	may be made for eligible persons, beginning with the day after the suspension ends.
10.6 		Subd. 3.Payments to facilities withdrawing from medical assistance. This 
10.7 	section applies whether the nursing facility participates fully in the medical assistance 
10.8 	program or is withdrawing from the medical assistance program. No medical assistance 
10.9 	payments may be made to any nursing facility which has withdrawn or is withdrawing 
10.10 	from the medical assistance program except as provided in subdivision 4, or federal law.
10.11 		Subd. 4.Termination. If a nursing facility terminates its participation in the 
10.12 	medical assistance program, whether voluntarily or involuntarily, the commissioner may 
10.13 	authorize the nursing facility to receive continued medical assistance reimbursement 
10.14 	until medical assistance residents can be relocated to nursing facilities participating in 
10.15 	the medical assistance program.

10.16 	Sec. 4. [256R.04] PROHIBITED PRACTICES.
10.17 		Subdivision 1.Financial exploitation. A nursing facility is not eligible to receive 
10.18 	medical assistance payments unless it refrains from all of the following:
10.19 	(1) charging, soliciting, accepting, or receiving from an applicant for admission to 
10.20 	the facility, or from anyone acting on behalf of the applicant, as a condition of admission, 
10.21 	expediting the admission, or as a requirement for the individual's continued stay, any fee, 
10.22 	deposit, gift, money, donation, or other consideration not otherwise required as payment 
10.23 	under the Medicaid state plan;
10.24 	(2) requiring an individual, or anyone acting on behalf of the individual, to loan 
10.25 	any money to the nursing facility;
10.26 	(3) requiring an individual, or anyone acting on behalf of the individual, to promise 
10.27 	to leave all or part of the individual's estate to the facility; or
10.28 	(4) requiring a third-party guarantee of payment to the facility as a condition of 
10.29 	admission, expedited admission, or continued stay in the facility.
10.30 	Nothing in this subdivision prohibits discharge for nonpayment of services in accordance 
10.31 	with state and federal regulations.
10.32 		Subd. 2.Restricting resident choice of vendors of medical services. (a) A nursing 
10.33 	facility is not eligible to receive medical assistance payments unless it refrains from 
10.34 	requiring any resident of the nursing facility to utilize a vendor of health care services 
10.35 	chosen by the nursing facility.
11.1 	(b) A nursing facility may require a resident to use pharmacies that utilize unit 
11.2 	dose packing systems approved by the Minnesota Board of Pharmacy, and may require a 
11.3 	resident to use pharmacies that are able to meet the federal regulations for safe and timely 
11.4 	administration of medications such as systems with specific number of doses, prompt 
11.5 	delivery of medications, or access to medications on a 24-hour basis. Notwithstanding 
11.6 	the provisions of this subdivision, nursing facilities shall not restrict a resident's choice of 
11.7 	pharmacy because the pharmacy utilizes a specific system of unit dose drug packing.
11.8 		Subd. 3.Differential treatment. A nursing facility is not eligible to receive medical 
11.9 	assistance payments unless it refrains from providing differential treatment on the basis 
11.10 	of status with regard to public assistance.
11.11 		Subd. 4.Discrimination. A nursing facility is not eligible to receive medical 
11.12 	assistance payments unless it refrains from discriminating in admissions, services offered, 
11.13 	or room assignment on the basis of status with regard to public assistance or refusal to 
11.14 	purchase special services. Admissions discrimination shall include, but is not limited to:
11.15 	(1) basing admissions decisions upon assurance by the applicant to the nursing 
11.16 	facility, or the applicant's guardian or conservator, that the applicant is neither eligible for 
11.17 	nor will seek public assistance for payment of nursing facility care costs; and
11.18 	(2) engaging in preferential selection from waiting lists based on an applicant's 
11.19 	ability to pay privately or an applicant's refusal to pay for a special service.
11.20 	The collection and use by a nursing facility of financial information of any applicant 
11.21 	pursuant to a preadmission screening program established by law shall not raise an 
11.22 	inference that the nursing facility is utilizing that information for any purpose prohibited 
11.23 	by this subdivision.
11.24 		Subd. 5.Kickbacks. A nursing facility is not eligible to receive medical assistance 
11.25 	payments unless it refrains from requiring any vendor of medical care as defined by 
11.26 	section 256B.02, subdivision 7, who is reimbursed by medical assistance under a separate 
11.27 	fee schedule, to pay any amount based on utilization or service levels or any portion of 
11.28 	the vendor's fee to the nursing facility except as payment for renting or leasing space or 
11.29 	equipment or purchasing support services from the nursing facility as limited by section 
11.30 	256R.54. All agreements must be disclosed to the commissioner upon request of the 
11.31 	commissioner. Nursing facilities and vendors of ancillary services that are found to be in 
11.32 	violation of this subdivision shall each be subject to an action by the state of Minnesota or 
11.33 	any of its subdivisions or agencies for treble civil damages on the portion of the fee in 
11.34 	excess of that allowed by this subdivision and section 256R.54. Damages awarded must 
11.35 	include three times the excess payments together with costs and disbursements including 
11.36 	reasonable attorney fees or their equivalent.
12.1 		Subd. 6.Refusing readmissions. A nursing facility is not eligible to receive medical 
12.2 	assistance payments unless it refrains from refusing, for more than 24 hours, to accept a 
12.3 	resident returning to the same bed or a bed certified for the same level of care, in accordance 
12.4 	with a physician's order authorizing transfer, after receiving inpatient hospital services.
12.5 		Subd. 7.Violations and penalties. For a period not to exceed 180 days, the 
12.6 	commissioner may continue to make medical assistance payments to a nursing facility 
12.7 	or boarding care home which is in violation of this section if extreme hardship to the 
12.8 	residents would result. In these cases the commissioner shall issue an order requiring the 
12.9 	nursing facility to correct the violation. The nursing facility shall have 20 days from its 
12.10 	receipt of the order to correct the violation. If the violation is not corrected within the 
12.11 	20-day period the commissioner may reduce the payment rate to the nursing facility 
12.12 	by up to 20 percent. The amount of the payment rate reduction shall be related to the 
12.13 	severity of the violation and shall remain in effect until the violation is corrected. The 
12.14 	nursing facility or boarding care home may appeal the commissioner's action pursuant to 
12.15 	the provisions of chapter 14 pertaining to contested cases. An appeal shall be considered 
12.16 	timely if written notice of appeal is received by the commissioner within 20 days of 
12.17 	notice of the commissioner's proposed action.
12.18 		Subd. 8.Temporary reimbursement to facilities in violation of this section.
 12.19 	In the event that the commissioner determines that, due to a violation of this section, a 
12.20 	nursing facility is not eligible for reimbursement for a resident who is eligible for medical 
12.21 	assistance, the commissioner may authorize the nursing facility to receive reimbursement 
12.22 	on a temporary basis until the resident can be relocated to a participating nursing facility.

12.23 	Sec. 5. [256R.05] REQUIRED PRACTICES.
12.24 		Subdivision 1.Preadmission screening. (a) Medical assistance reimbursement 
12.25 	for nursing facilities shall be authorized for a medical assistance recipient only if 
12.26 	a preadmission screening has been conducted prior to admission or the county has 
12.27 	authorized an exemption. Medical assistance reimbursement for nursing facilities shall 
12.28 	not be provided for any recipient who the local screener has determined does not meet the 
12.29 	level of care criteria for nursing facility placement in section 144.0724, subdivision 11, or, 
12.30 	if indicated, has not had a level II OBRA evaluation as required under the federal Omnibus 
12.31 	Budget Reconciliation Act of 1987, unless an admission for a recipient with mental illness 
12.32 	is approved by the local mental health authority or an admission for a recipient with 
12.33 	developmental disability is approved by the state developmental disability authority.
12.34 	(b) The nursing facility must not bill a person who is not a medical assistance 
12.35 	recipient for resident days that preceded the date of completion of screening activities 
13.1 	as required under section 256.975, subdivisions 7a to 7c. The nursing facility must 
13.2 	include unreimbursed resident days in the nursing facility resident day totals reported to 
13.3 	the commissioner.
13.4 		Subd. 2.Referrals to Medicare providers. (a) Notwithstanding sections 256R.04 
13.5 	and 256R.06, subdivisions 2 and 4, nursing facility providers that do not participate in 
13.6 	or accept Medicare assignment must refer and document the referral of dual eligible 
13.7 	recipients for whom placement is requested and for whom the resident would be qualified 
13.8 	for a Medicare-covered stay to Medicare providers. The commissioner shall audit nursing 
13.9 	facilities that do not accept Medicare and determine if dual eligible individuals with 
13.10 	Medicare qualifying stays have been admitted. If such a determination is made, the 
13.11 	commissioner shall deny Medicaid payment for the first 20 days of that resident's stay.
13.12 	(b) A nursing facility that violates this subdivision is subject to section 256R.04, 
13.13 	subdivisions 7 and 8.

13.14 	Sec. 6. [256R.06] PRIVATE PAY RESIDENTS; REQUIRED PRACTICES.
13.15 		Subdivision 1.Medical assistance rates not to exceed private pay residents' 
13.16 	rates. (a) The total payment rate must not exceed the rate paid by private paying residents 
13.17 	for similar services for the same period.
13.18 	(b) The medical assistance rate limitation in paragraph (a) shall not apply to 
13.19 	retroactive adjustments to the total payment rate established under this chapter unless the 
13.20 	facility was in violation of paragraph (a) prior to the retroactive rate adjustment.
13.21 		Subd. 2.Private pay rates not to exceed medical assistance residents' rates. (a) 
13.22 	A nursing facility is not eligible to receive medical assistance payments unless it refrains 
13.23 	from charging private paying residents rates for similar services which exceed those which 
13.24 	are approved by the state agency for medical assistance recipients as determined by the 
13.25 	prospective desk audit rate. The nursing facility may (1) charge private paying residents a 
13.26 	higher rate for a private room, and (2) charge for special services which are not included 
13.27 	in the daily rate if medical assistance residents are charged separately at the same rate for 
13.28 	the same services in addition to the daily rate paid by the commissioner.
13.29 	(b) Services covered by the payment rate must be the same regardless of payment 
13.30 	source. 
13.31 	(c) Special services, if offered, must:
13.32 	(1) be available to all residents in all areas of the nursing facility;
13.33 	(2) be charged separately at the same rate; and
13.34 	(3) not include services which must be provided by the nursing facility in order to 
13.35 	comply with licensure or certification standards and that if not provided would result in a 
14.1 	deficiency or violation by the nursing facility. Services beyond those required to comply 
14.2 	with licensure or certification standards must not be charged separately as a special service 
14.3 	if they were included in the payment rate for the previous reporting period.
14.4 	(d) Residents must be free to select or decline special services.
14.5 		Subd. 3.Violations and penalties. A nursing facility that violates subdivision 2, 6, 
14.6 	or 7 is subject to section 256R.04, subdivisions 7 and 8.
14.7 		Subd. 4.Civil penalties and procedures. A nursing facility that charges a private 
14.8 	paying resident a rate in violation of subdivision 2 is subject to an action by the state of 
14.9 	Minnesota or any of its subdivisions or agencies for civil damages. A private paying 
14.10 	resident or the resident's legal representative has a cause of action for civil damages against 
14.11 	a nursing facility that charges the resident rates in violation of subdivision 2. The damages 
14.12 	awarded shall include three times the payments that result from the violation, together with 
14.13 	costs and disbursements, including reasonable attorney fees or their equivalent. A private 
14.14 	paying resident or the resident's legal representative, the state, subdivision or agency, or a 
14.15 	nursing facility may request a hearing to determine the allowed rate or rates at issue in 
14.16 	the cause of action. Within 15 calendar days after receiving a request for such a hearing, 
14.17 	the commissioner shall request assignment of an administrative law judge under sections 
14.18 	14.48 to 14.56 to conduct the hearing as soon as possible or according to agreement by 
14.19 	the parties. The administrative law judge shall issue a report within 15 calendar days 
14.20 	following the close of the hearing. The prohibition set forth in subdivision 2 shall not 
14.21 	apply to facilities licensed as boarding care facilities which are not certified as skilled or 
14.22 	intermediate care facilities level I or II for reimbursement through medical assistance.
14.23 		Subd. 5.Notice to residents. (a) No increase in nursing facility rates for private 
14.24 	paying residents shall be effective unless the nursing facility notifies the resident or person 
14.25 	responsible for payment of the increase in writing 30 days before the increase takes effect.
14.26 	A nursing facility may adjust its rates without giving the notice required by this 
14.27 	subdivision when the purpose of the rate adjustment is to reflect a change in the case 
14.28 	mix classification of the resident.
14.29 	If the state fails to set rates as required by section 256R.09, subdivision 1, the time 
14.30 	required for giving notice is decreased by the number of days by which the state was 
14.31 	late in setting the rates.
14.32 	(b) If the state does not set rates by the date required in section 256R.09, subdivision 
14.33 	1, nursing facilities shall meet the requirement for advance notice by informing the 
14.34 	resident or person responsible for payments, on or before the effective date of the increase, 
14.35 	that a rate increase will be effective on that date.
15.1 	If the exact amount has not yet been determined, the nursing facility may raise the 
15.2 	rates by the amount anticipated to be allowed. Any amounts collected from private pay 
15.3 	residents in excess of the allowable rate must be repaid to private pay residents with 
15.4 	interest at the rate used by the commissioner of revenue for the late payment of taxes and 
15.5 	in effect on the date the rate increase is effective.
15.6 		Subd. 6.Refund of excess charges. Any nursing facility which has charged a 
15.7 	resident a rate for a case mix classification upon admission which is in excess of the rate 
15.8 	for the case mix classification established by the commissioner of health and effective on 
15.9 	the date of admission, must refund the amount charged in excess of that rate. Refunds 
15.10 	must be credited to the next monthly billing or refunded within 15 days of receipt of 
15.11 	the case mix classification notice from the Department of Health. Failure to refund the 
15.12 	excess charge is a violation of this section.
15.13 		Subd. 7.Notification to a spouse or health care agent. (a) When a private pay 
15.14 	resident who has not yet been screened by the preadmission screening team is admitted to 
15.15 	a nursing facility or boarding care facility, the nursing facility or boarding care facility 
15.16 	must notify the resident and the resident's spouse or health care agent of the following:
15.17 	(1) their right to retain certain resources under sections 256B.0575, 256B.058, 
15.18 	256B.059, 256B.0595, and 256B.14, subdivision 2; and
15.19 	(2) that the federal Medicare hospital insurance benefits program covers posthospital 
15.20 	extended care services in a qualified skilled nursing facility for up to 100 days and that 
15.21 	there are several limitations on this benefit. The resident and the resident's family or 
15.22 	health care agent must be informed about all mechanisms to appeal limitations imposed 
15.23 	under this federal benefit program.
15.24 	(b) This notice may be included in the nursing facility's or boarding care facility's 
15.25 	admission agreement and must clearly explain what resources the resident and spouse may 
15.26 	retain if the resident applies for medical assistance. The Department of Human Services 
15.27 	must notify nursing facilities and boarding care facilities of changes in the determination 
15.28 	of medical assistance eligibility that relate to resources retained by a resident and the 
15.29 	resident's spouse.
15.30 	(c) The preadmission screening team has primary responsibility for informing all 
15.31 	private pay applicants to a nursing facility or boarding care facility of the resources the 
15.32 	resident and spouse may retain.
15.33 	DATA COLLECTION AND REPORTING

15.34 	Sec. 7. [256R.07] ADEQUATE DOCUMENTATION.
16.1 		Subdivision 1.Criteria. A nursing facility shall keep adequate documentation. In 
16.2 	order to be adequate, documentation must:
16.3 	(1) be maintained in orderly, well-organized files;
16.4 	(2) not include documentation of more than one nursing facility in one set of files 
16.5 	unless transactions may be traced by the commissioner to the nursing facility's annual 
16.6 	cost report;
16.7 	(3) include a paid invoice or copy of a paid invoice with date of purchase, vendor 
16.8 	name and address, purchaser name and delivery destination address, listing of items or 
16.9 	services purchased, cost of items purchased, account number to which the cost is posted, 
16.10 	and a breakdown of any allocation of costs between accounts or nursing facilities. If any 
16.11 	of the information is not available, the nursing facility shall document its good faith 
16.12 	attempt to obtain the information;
16.13 	(4) include contracts, agreements, amortization schedules, mortgages, other debt 
16.14 	instruments, and all other documents necessary to explain the nursing facility's costs or 
16.15 	revenues; and
16.16 	(5) be retained by the nursing facility to support the five most recent annual cost 
16.17 	reports. The commissioner may extend the period of retention if the field audit was 
16.18 	postponed because of inadequate record keeping or accounting practices as in section 
16.19 	256R.13, subdivisions 2 and 4, the records are necessary to resolve a pending appeal, or 
16.20 	the records are required for the enforcement of sections 256R.04; 256R.05, subdivision 
16.21 	2; 256R.06, subdivisions 2, 6, and 7; 256R.08, subdivisions 1 to 3; and 256R.09, 
16.22 	subdivisions 3 and 4.
16.23 		Subd. 2.Documentation of compensation. Compensation for personal services, 
16.24 	regardless of whether treated as identifiable costs or costs that are not identifiable, must be 
16.25 	documented on payroll records. Payrolls must be supported by time and attendance or 
16.26 	equivalent records for individual employees. Salaries and wages of employees which are 
16.27 	allocated to more than one cost category must be supported by time distribution records. 
16.28 	The method used must produce a proportional distribution of actual time spent, or an 
16.29 	accurate estimate of time spent performing assigned duties. The nursing facility that 
16.30 	chooses to estimate time spent must use a statistically valid method. The compensation 
16.31 	must reflect an amount proportionate to a full-time basis if the services are rendered on 
16.32 	less than a full-time basis.
16.33 		Subd. 3.Adequate documentation supporting nursing facility payrolls. Payroll 
16.34 	records supporting compensation costs claimed by nursing facilities must be supported by 
16.35 	affirmative time and attendance records prepared by each individual at intervals of not 
17.1 	more than one month. The requirements of this subdivision are met when documentation 
17.2 	is provided under either clause (1) or (2) as follows:
17.3 	(1) the affirmative time and attendance record must identify the individual's name; 
17.4 	the days worked during each pay period; the number of hours worked each day; and the 
17.5 	number of hours taken each day by the individual for vacation, sick, and other leave. The 
17.6 	affirmative time and attendance record must include a signed verification by the individual 
17.7 	and the individual's supervisor, if any, that the entries reported on the record are correct; or
17.8 	(2) if the affirmative time and attendance records identifying the individual's name, 
17.9 	the days worked each pay period, the number of hours worked each day, and the number 
17.10 	of hours taken each day by the individual for vacation, sick, and other leave are placed 
17.11 	on microfilm, equipment must be made available for viewing and printing them, or if the 
17.12 	records are stored as automated data, summary data must be available for viewing and 
17.13 	printing.
17.14 		Subd. 4.Documentation of mileage. Except for vehicles used exclusively for 
17.15 	nursing facility business, the nursing facility or related organization must maintain a 
17.16 	motor vehicle log that shows nursing facility mileage for the reporting period. Mileage 
17.17 	paid for the use of a personal vehicle must be documented.
17.18 		Subd. 5.Records for cost allocations. Complete and orderly records must be 
17.19 	maintained for cost allocations made to cost categories.

17.20 	Sec. 8. [256R.08] REPORTING OF FINANCIAL STATEMENTS.
17.21 		Subdivision 1.Reporting of financial statements. (a) No later than February 1 of 
17.22 	each year, a nursing facility shall:
17.23 	(1) provide the state agency with a copy of its audited financial statements or 
17.24 	its working trial balance;
17.25 	(2) provide the state agency with a statement of ownership for the facility;
17.26 	(3) provide the state agency with separate, audited financial statements or working 
17.27 	trial balances for every other facility owned in whole or in part by an individual or entity 
17.28 	that has an ownership interest in the facility;
17.29 	(4) upon request, provide the state agency with separate, audited financial statements 
17.30 	or working trial balances for every organization with which the facility conducts business 
17.31 	and which is owned in whole or in part by an individual or entity which has an ownership 
17.32 	interest in the facility;
17.33 	(5) provide the state agency with copies of leases, purchase agreements, and other 
17.34 	documents related to the lease or purchase of the nursing facility; and
18.1 	(6) upon request, provide the state agency with copies of leases, purchase 
18.2 	agreements, and other documents related to the acquisition of equipment, goods, and 
18.3 	services which are claimed as allowable costs.
18.4 	(b) Audited financial statements submitted under paragraph (a) must include a 
18.5 	balance sheet, income statement, statement of the rate or rates charged to private paying 
18.6 	residents, statement of retained earnings, statement of cash flows, notes to the financial 
18.7 	statements, audited applicable supplemental information, and the public accountant's 
18.8 	report. Public accountants must conduct audits in accordance with chapter 326A. The cost 
18.9 	of an audit shall not be an allowable cost unless the nursing facility submits its audited 
18.10 	financial statements in the manner otherwise specified in this subdivision. A nursing 
18.11 	facility must permit access by the state agency to the public accountant's audit work papers 
18.12 	that support the audited financial statements submitted under paragraph (a).
18.13 	(c) Documents or information provided to the state agency pursuant to this 
18.14 	subdivision shall be public.
18.15 	(d) If the requirements of paragraphs (a) and (b) are not met, the reimbursement 
18.16 	rate may be reduced to 80 percent of the rate in effect on the first day of the fourth 
18.17 	calendar month after the close of the reporting period and the reduction shall continue 
18.18 	until the requirements are met.
18.19 		Subd. 2.Extensions. The commissioner may grant up to a 15-day extension of the 
18.20 	reporting deadline to a nursing facility for good cause. To receive such an extension, a 
18.21 	nursing facility shall submit a written request by January 1. The commissioner shall notify 
18.22 	the nursing facility of the decision by January 15. Between January 1 and February 1, 
18.23 	the nursing facility may request a reporting extension for good cause by telephone and 
18.24 	followed by a written request.
18.25 		Subd. 3.False reports. If a nursing facility knowingly supplies inaccurate or false 
18.26 	information in a required report that results in an overpayment, the commissioner shall:
18.27 	(1) immediately adjust the nursing facility's payment rate to recover the entire 
18.28 	overpayment within the rate year;
18.29 	(2) terminate the commissioner's agreement with the nursing facility;
18.30 	(3) prosecute under applicable state or federal law; or
18.31 	(4) use any combination of the foregoing actions.
18.32 		Subd. 4.Violations and penalties. A nursing facility that violates this section is 
18.33 	subject to section 256R.04, subdivisions 7 and 8.

18.34 	Sec. 9. [256R.09] REPORTING OF STATISTICAL AND COST REPORTS.
19.1 		Subdivision 1.Reporting timeline. Each nursing facility shall file a statistical and 
19.2 	cost report for the prior reporting period by February 1 in a form and manner specified by 
19.3 	the commissioner. Notice of rates shall be distributed by November 15.
19.4 		Subd. 2.Reporting of statistical and cost information. All nursing facilities shall 
19.5 	provide information annually to the commissioner on a form and in a manner determined 
19.6 	by the commissioner. The commissioner may separately require facilities to submit in a 
19.7 	manner specified by the commissioner documentation of statistical and cost information 
19.8 	included in the report to ensure accuracy in establishing payment rates and to perform 
19.9 	audit and appeal review functions under this chapter. The commissioner may also require 
19.10 	nursing facilities to provide statistical and cost information for a subset of the items in 
19.11 	the annual report on a semiannual basis. Nursing facilities shall report only costs directly 
19.12 	related to the operation of the nursing facility. The facility shall not include costs which 
19.13 	are separately reimbursed by residents, medical assistance, or other payors. Allocations of 
19.14 	costs from central, affiliated, or corporate office and related organization transactions shall 
19.15 	be reported according to sections 256R.07, subdivision 3, and 256R.12, subdivisions 1 to 
19.16 	7. The commissioner shall not grant facilities extensions to the filing deadline.
19.17 		Subd. 3.Record retention.  Facilities shall retain all records necessary to document 
19.18 	statistical and cost information on the report for a period of no less than seven years. 
19.19 	The commissioner may amend information in the report according to section 256R.13, 
19.20 	subdivision 2. For computerized accounting systems, the records must include copies of 
19.21 	electronically generated media and technology to enable access to the records.
19.22 		Subd. 4.Incomplete or inaccurate reports; reports not submitted in a timely 
19.23 	manner. The commissioner may reject a report filed by a nursing facility under this section 
19.24 	if the commissioner determines that the report has been filed in a form that is incomplete 
19.25 	or inaccurate and the information is insufficient to establish accurate payment rates. In the 
19.26 	event that a complete report is not submitted in a timely manner, the commissioner shall 
19.27 	reduce the reimbursement payments to a nursing facility to 85 percent of amounts due 
19.28 	until the information is filed. The release of withheld payments shall be retroactive for 
19.29 	no more than 90 days. A nursing facility that does not submit a report or whose report is 
19.30 	filed in a timely manner but determined to be incomplete shall be given written notice that 
19.31 	a payment reduction is to be implemented and allowed ten days to complete the report 
19.32 	prior to any payment reduction. The commissioner may delay the payment withhold under 
19.33 	exceptional circumstances to be determined at the sole discretion of the commissioner.
19.34 		Subd. 5.Method of accounting. The accrual method of accounting in accordance 
19.35 	with generally accepted accounting principles is the only method acceptable for purposes 
19.36 	of satisfying the reporting requirements of this chapter. If a governmentally owned nursing 
20.1 	facility demonstrates that the accrual method of accounting is not applicable to its accounts 
20.2 	and that a cash or modified accrual method of accounting more accurately reports the 
20.3 	nursing facility's financial operations, the commissioner shall permit the governmentally 
20.4 	owned nursing facility to use a cash or modified accrual method of accounting.
20.5 		Subd. 6.Amending statistical and cost information. (a) Nursing facilities may, 
20.6 	within 12 months of the due date of a statistical and cost report, file an amendment 
20.7 	when errors or omissions in the annual statistical and cost report are discovered and 
20.8 	an amendment would result in a rate increase of at least 0.15 percent of the statewide 
20.9 	weighted average operating payment rate and shall, at any time, file an amendment which 
20.10 	would result in a rate reduction of at least 0.15 percent of the statewide weighted average 
20.11 	operating payment rate.
20.12 	(b) The commissioner must calculate the statewide average operating payment 
20.13 	rate as follows:
20.14 	(1) for each nursing facility reimbursed under this chapter, multiply the number of 
20.15 	resident days in each case mix classification the facility has billed to the commissioner 
20.16 	under this chapter during the previous reporting year by the facility's corresponding case 
20.17 	mix adjusted total payment rates; 
20.18 	(2) sum the results of clause (1) for all facilities reimbursed under this chapter;
20.19 	(3) calculate the total number of resident days billed by all nursing facilities 
20.20 	reimbursed under this chapter during the previous reporting year; and
20.21 	(4) divide the result of clause (2) by the result of clause (3).
20.22 	(c) The commissioner shall make retroactive adjustments to the total payment rate of 
20.23 	a nursing facility if an amendment is accepted. When a retroactive adjustment is made as a 
20.24 	result of an amended report, audit findings, or other determination of an incorrect payment 
20.25 	rate, the commissioner may settle the payment error through a negotiated agreement with 
20.26 	the facility and a gross adjustment of the payments to the facility. Retroactive adjustments 
20.27 	shall not be applied to private pay residents. An error or omission for purposes of this 
20.28 	subdivision does not include a nursing facility's determination that an election between 
20.29 	permissible alternatives was not advantageous and should be changed.
20.30 		Subd. 7.Reporting of false statistical and cost information. If the commissioner 
20.31 	determines that a nursing facility knowingly supplied inaccurate or false information 
20.32 	or failed to file an amendment to a statistical and cost report that resulted in or would 
20.33 	result in an overpayment, the commissioner shall immediately adjust the nursing facility's 
20.34 	payment rate and recover the entire overpayment. The commissioner may also terminate 
20.35 	the commissioner's agreement with the nursing facility and prosecute under applicable 
20.36 	state or federal law.

21.1 	Sec. 10. [256R.10] ALLOWED COSTS.
21.2 		Subdivision 1.General cost principles. Only costs determined to be allowable 
21.3 	shall be used to compute the total payment rate for nursing facilities participating in the 
21.4 	medical assistance program. To be considered an allowable cost for rate-setting purposes, 
21.5 	a cost must satisfy the following criteria:
21.6 	(1) the cost is ordinary, necessary, and related to resident care;
21.7 	(2) the cost is what a prudent and cost-conscious business person would pay for the 
21.8 	specific good or service in the open market in an arm's-length transaction;
21.9 	(3) the cost is for goods or services actually provided in the nursing facility;
21.10 	(4) the cost effects of transactions that have the effect of circumventing this chapter 
21.11 	are not allowable under the principle that the substance of the transaction shall prevail 
21.12 	over form; and
21.13 	(5) costs that are incurred due to management inefficiency, unnecessary care or 
21.14 	facilities, agreements not to compete, or activities not commonly accepted in the nursing 
21.15 	facility care field are not allowable.
21.16 		Subd. 2.Employees represented by a collective bargaining agent. (a) For 
21.17 	facilities where employees are represented by collective bargaining agents, costs related 
21.18 	to the salaries and wages, payroll taxes, and employer's share of fringe benefit costs, 
21.19 	except employer health insurance costs, for facility employees who are members of the 
21.20 	bargaining unit are allowed costs only if:
21.21 	(1) these costs are incurred pursuant to a collective bargaining agreement. The 
21.22 	commissioner shall allow a collective bargaining agent until March 1 following the date on 
21.23 	which the cost report was required to be submitted to notify the commissioner if a collective 
21.24 	bargaining agreement, effective on the last day of the reporting period, was not in effect; or
21.25 	(2) the collective bargaining agent notifies the commissioner by October 1 following 
21.26 	the date on which the cost report was required to be submitted that these costs are 
21.27 	incurred pursuant to an agreement or understanding between the facility and the collective 
21.28 	bargaining agent.
21.29 	(b) In any year when a portion of a facility's reported costs are not allowed costs 
21.30 	under paragraph (a), when calculating the operating payment rate for the facility, the 
21.31 	commissioner shall use the facility's allowed costs from the facility's second most recent 
21.32 	cost report in place of the nonallowed costs. For the purpose of setting the other operating 
21.33 	payment rate under section 256R.24, subdivision 3, the commissioner shall reduce the 
21.34 	other operating payment rate by the difference between the nonallowed costs and the 
21.35 	allowed costs from the facility's second most recent cost report.
22.1 		Subd. 3.Employer sponsored retirement plans.  In addition to the approved 
22.2 	pension or profit-sharing plans allowed by Minnesota Rules, parts 9549.0010 to 
22.3 	9549.0080, the commissioner shall allow those plans specified in Internal Revenue Code, 
22.4 	sections 403(b) and 408(k).
22.5 		Subd. 4.Workers' compensation insurance costs.  The commissioner shall allow 
22.6 	as workers' compensation insurance costs under section 256R.02, subdivision 22, the costs 
22.7 	of workers' compensation coverage obtained under the following conditions:
22.8 	(1) a plan approved by the commissioner of commerce as a Minnesota group or 
22.9 	individual self-insurance plan as provided in section 79A.03;
22.10 	(2) a plan in which:
22.11 	(i) the nursing facility, directly or indirectly, purchases workers' compensation 
22.12 	coverage in compliance with section 176.181, subdivision 2, from an authorized insurance 
22.13 	carrier;
22.14 	(ii) a related organization to the nursing facility reinsures the workers' compensation 
22.15 	coverage purchased, directly or indirectly, by the nursing facility; and
22.16 	(iii) all of the conditions in clause (4) are met;
22.17 	(3) a plan in which:
22.18 	(i) the nursing facility, directly or indirectly, purchases workers' compensation 
22.19 	coverage in compliance with section 176.181, subdivision 2, from an authorized insurance 
22.20 	carrier;
22.21 	(ii) the insurance premium is calculated retrospectively, including a maximum 
22.22 	premium limit, and paid using the paid loss retro method; and
22.23 	(iii) all of the conditions in clause (4) are met;
22.24 	(4) additional conditions are:
22.25 	(i) the costs of the plan are allowable under the federal Medicare program;
22.26 	(ii) the reserves for the plan are maintained in an account controlled and administered 
22.27 	by a person which is not a related organization to the nursing facility;
22.28 	(iii) the reserves for the plan cannot be used, directly or indirectly, as collateral 
22.29 	for debts incurred or other obligations of the nursing facility or related organizations to 
22.30 	the nursing facility;
22.31 	(iv) if the plan provides workers' compensation coverage for non-Minnesota nursing 
22.32 	facilities, the plan's cost methodology must be consistent among all nursing facilities 
22.33 	covered by the plan, and if reasonable, is allowed notwithstanding any reimbursement 
22.34 	laws regarding cost allocation to the contrary;
23.1 	(v) central, affiliated, corporate, or nursing facility costs related to their 
23.2 	administration of the plan are costs which must remain in the nursing facility's 
23.3 	administrative cost category and must not be allocated to other cost categories;
23.4 	(vi) required security deposits, whether in the form of cash, investments, securities, 
23.5 	assets, letters of credit, or in any other form are not allowable costs for purposes of 
23.6 	establishing the facility's payment rate; and
23.7 	(vii) a group of nursing facilities related by common ownership that self-insures 
23.8 	workers' compensation may allocate its directly identified costs of self-insuring its 
23.9 	Minnesota nursing facility workers among those nursing facilities in the group that are 
23.10 	reimbursed under this chapter. The method of cost allocation shall be based on the ratio 
23.11 	of each nursing facility's total allowable salaries and wages to that of the nursing facility 
23.12 	group's total allowable salaries and wages, then similarly allocated within each nursing 
23.13 	facility's operating cost categories. The costs associated with the administration of the 
23.14 	group's self-insurance plan must remain classified in the nursing facility's administrative 
23.15 	cost category. A written request of the nursing facility group's election to use this alternate 
23.16 	method of allocation of self-insurance costs must be received by the commissioner no 
23.17 	later than May 1, 1998, to take effect July 1, 1998, or such costs shall continue to be 
23.18 	allocated under the existing cost allocation methods. Once a nursing facility group elects 
23.19 	this method of cost allocation for its workers' compensation self-insurance costs, it shall 
23.20 	remain in effect until such time as the group no longer self-insures these costs;
23.21 	(5) any costs allowed pursuant to clauses (1) to (3) are subject to the following 
23.22 	requirements:
23.23 	(i) if the nursing facility is sold or otherwise ceases operations, the plan's reserves 
23.24 	must be subject to an actuarially based settle up after 36 months from the date of sale or 
23.25 	the date on which operations ceased. The facility's medical assistance portion of the 
23.26 	total excess plan reserves must be paid to the state within 30 days following the date on 
23.27 	which excess plan reserves are determined;
23.28 	(ii) any distribution of excess plan reserves made to or withdrawals made by the 
23.29 	nursing facility or a related organization are applicable credits and must be used to reduce 
23.30 	the nursing facility's workers' compensation insurance costs in the reporting period in 
23.31 	which a distribution or withdrawal is received;
23.32 	(iii) if reimbursement for the plan is sought under the federal Medicare program, 
23.33 	and is audited pursuant to the Medicare program, the nursing facility must provide a copy 
23.34 	of Medicare's final audit report, including attachments and exhibits, to the commissioner 
23.35 	within 30 days of receipt by the nursing facility or any related organization. The 
23.36 	commissioner shall implement the audit findings associated with the plan upon receipt of 
24.1 	Medicare's final audit report. The department's authority to implement the audit findings is 
24.2 	independent of its authority to conduct a field audit.
24.3 		Subd. 5.Salaries and wages. Salaries and wages must be paid within 30 days of 
24.4 	the end of the reporting period in order to be allowable costs of the reporting period.
24.5 		Subd. 6.Applicable credits. Applicable credits must be used to offset or reduce the 
24.6 	expenses of the nursing facility to the extent that the cost to which the credits apply was 
24.7 	claimed as a nursing facility cost. Interest income, dividend income, and other investment 
24.8 	income of the nursing facility or related organization are not applicable credits except to 
24.9 	the extent that the interest expense on working capital debt is incurred and claimed as a 
24.10 	reimbursable expense by the nursing facility or related organization.

24.11 	Sec. 11. [256R.11] NONALLOWED COSTS.
24.12 		Subdivision 1.Generally. (a) The following costs shall not be recognized as 
24.13 	allowable:
24.14 	(1) political contributions;
24.15 	(2) salaries or expenses of a lobbyist, as defined in section 10A.01, subdivision 
24.16 	21, for lobbying activities;
24.17 	(3) advertising designed to encourage potential residents to select a particular 
24.18 	nursing facility;
24.19 	(4) assessments levied by the commissioner of health for uncorrected violations;
24.20 	(5) legal and related expenses for unsuccessful challenges to decisions by 
24.21 	governmental agencies;
24.22 	(6) memberships in sports, health or similar social clubs or organizations;
24.23 	(7) costs incurred for activities directly related to influencing employees with respect 
24.24 	to unionization; and
24.25 	(8) costs of providing services which are billed separately from the nursing facility's 
24.26 	payment rate or pursuant to Minnesota Rules, parts 9505.0170 to 9505.0475.
24.27 	(b) The commissioner shall by rule exclude the costs of any other items not directly 
24.28 	related to the provision of resident care.
24.29 		Subd. 2.Collective bargaining. Costs incurred for any activities which are directed 
24.30 	at or are intended to influence or dissuade employees in the exercise of their legal rights to 
24.31 	freely engage in the process of selecting an exclusive representative for the purpose of 
24.32 	collective bargaining with their employer shall not be allowable for purposes of setting 
24.33 	payment rates.

25.1 	EFFECTIVE DATE. The grant of rulemaking authority to the commissioner 
25.2 	of human services in this section is a continuation of authority previously granted in 
25.3 	Minnesota Statutes, section 256B.47, subdivision 1.

25.4 	Sec. 12. [256R.12] COST ALLOCATION.
25.5 		Subdivision 1.Allocation; direct identification of costs; management agreement.
 25.6 	All costs that can be directly identified with a specific nursing facility that is a related 
25.7 	organization to the central, affiliated, or corporate office, or that is controlled by the 
25.8 	central, affiliated, or corporate office under a management agreement, must be allocated to 
25.9 	that nursing facility.
25.10 		Subd. 2.Allocation; direct identification of costs to other activities. All costs that 
25.11 	can be directly identified with any other activity or function not described in subdivision 1 
25.12 	must be allocated to that activity or function.
25.13 		Subd. 3.Cost allocation on a functional basis. (a) Costs that have not been 
25.14 	directly identified must be allocated to nursing facilities on a basis designed to equitably 
25.15 	allocate the costs to the nursing facilities or activities receiving the benefits of the costs. 
25.16 	This allocation must be made in a manner reasonably related to the services received by 
25.17 	the nursing facilities. Where practical and the amounts are material, these costs must be 
25.18 	allocated on a functional basis. The functions, or cost centers used to allocate central 
25.19 	office costs, and the unit bases used to allocate the costs, including those central office 
25.20 	costs allocated according to subdivision 4, must be used consistently from one central 
25.21 	office accounting period to another.
25.22 	(b) If the central office wishes to change its allocation bases and believes the change 
25.23 	will result in more appropriate and more accurate allocations, the central office must make 
25.24 	a written request, with its justification, to the commissioner for approval of the change no 
25.25 	later than 120 days after the beginning of the central office accounting period to which 
25.26 	the change is to apply. The commissioner's approval of a central office request must be 
25.27 	furnished to the central office in writing. Where the commissioner approves the central 
25.28 	office request, the change must be applied to the accounting period for which the request 
25.29 	was made, and to all subsequent central office accounting periods unless the commissioner 
25.30 	approves a subsequent request for change by the central office. The effective date of the 
25.31 	change will be the beginning of the accounting period for which the request was made.
25.32 		Subd. 4.Allocation of remaining costs; allocation ratio. (a) After the costs that can 
25.33 	be directly identified according to subdivisions 1 and 2 have been allocated, the remaining 
25.34 	central, affiliated, or corporate office costs must be allocated between the nursing facility 
25.35 	operations and the other activities or facilities unrelated to the nursing facility operations 
26.1 	based on the ratio of total operating costs. However, in the event that these remaining 
26.2 	costs are partially attributable to the start-up of home and community-based services 
26.3 	intended to fill a gap identified by the local agency, the facility may assign these remaining 
26.4 	costs to the appropriate cost category of the facility for a period not to exceed two years.
26.5 	(b) For purposes of allocating these remaining central, affiliated, or corporate office 
26.6 	costs, the numerator for the allocation ratio is determined as follows:
26.7 	(1) for nursing facilities that are related organizations or are controlled by a central, 
26.8 	affiliated, or corporate office under a management agreement, the numerator of the 
26.9 	allocation ratio is equal to the sum of the total operating costs incurred by each related 
26.10 	organization or controlled nursing facility;
26.11 	(2) for a central, affiliated, or corporate office providing goods or services to related 
26.12 	organizations that are not nursing facilities, the numerator of the allocation ratio is equal to 
26.13 	the sum of the total operating costs incurred by the nonnursing facility related organizations;
26.14 	(3) for a central, affiliated, or corporate office providing goods or services to 
26.15 	unrelated nursing facilities under a consulting agreement, the numerator of the allocation 
26.16 	ratio is equal to the greater of directly identified central, affiliated, or corporate costs or 
26.17 	the contracted amount; or
26.18 	(4) for business activities that involve the providing of goods or services to unrelated 
26.19 	parties which are not nursing facilities, the numerator of the allocation ratio is equal to the 
26.20 	greater of directly identified costs or revenues generated by the activity or function.
26.21 	(c) The denominator for the allocation ratio is the sum of the numerators in 
26.22 	paragraph (b), clauses (1) to (4).
26.23 		Subd. 5.Cost allocation between nursing facilities. (a) Nursing operations that 
26.24 	have nursing facilities in Minnesota and comparable facilities outside of Minnesota must 
26.25 	allocate the nursing operation's central, affiliated, or corporate office costs identified 
26.26 	in subdivision 4 to Minnesota, based on the ratio of the sum of the nursing operation's 
26.27 	resident days in Minnesota nursing facilities to the sum of the nursing operation's resident 
26.28 	days in all its facilities.
26.29 	(b) The Minnesota nursing operation's central, affiliated, or corporate office costs 
26.30 	identified in paragraph (a) must be allocated to each Minnesota nursing facility on the 
26.31 	basis of resident days.
26.32 		Subd. 6.Related organization costs. (a) Costs applicable to services, capital 
26.33 	assets, and supplies directly or indirectly furnished to the nursing facility by any related 
26.34 	organization are includable in the allowable cost of the nursing facility at the purchase 
26.35 	price paid by the related organization for capital assets or supplies and at the cost incurred 
26.36 	by the related organization for the provision of services to the nursing facility if these 
27.1 	prices or costs do not exceed the price of comparable services, capital assets, or supplies 
27.2 	that could be purchased elsewhere. For this purpose, the related organization's costs must 
27.3 	not include an amount for markup or profit.
27.4 	(b) If the related organization in the normal course of business sells services, capital 
27.5 	assets, or supplies to nonrelated organizations, the cost to the nursing facility is the 
27.6 	nonrelated organization's price provided that sales to nonrelated organizations constitute at 
27.7 	least 50 percent of total annual sales of similar services, capital assets, or supplies.
27.8 	(c) The cost of ownership of a capital asset used by the nursing facility must be 
27.9 	included in the allowable cost of the nursing facility even though it is owned by a related 
27.10 	organization.
27.11 		Subd. 7.Receiverships. This section does not apply to payment rates determined 
27.12 	under sections 245A.12, 245A.13, and 256R.52, except that any additional directly 
27.13 	identified costs associated with the Department of Human Services' or the Department 
27.14 	of Health's managing agent under a receivership agreement must be allocated to the 
27.15 	facility under receivership, and are nonallowable costs to the managing agent on the 
27.16 	facility's cost reports.
27.17 		Subd. 8.Allocation of costs for therapy services; non-hospital-attached 
27.18 	facilities. (a) To ensure the avoidance of double payments as required by section 256R.54, 
27.19 	the direct and indirect reporting period costs of providing residents of nursing facilities 
27.20 	that are not hospital attached with therapy services that are billed separately from the 
27.21 	nursing facility payment rate or according to Minnesota Rules, parts 9505.0170 to 
27.22 	9505.0475, must be determined and deducted from the appropriate cost categories of the 
27.23 	annual cost report according to paragraphs (b) to (g).
27.24 	(b) The costs of wages and salaries for employees providing or participating in 
27.25 	providing and consultants providing services shall be allocated to the therapy service 
27.26 	based on direct identification.
27.27 	(c) The costs of fringe benefits and payroll taxes relating to the costs in paragraph (b) 
27.28 	must be allocated to the therapy service based on direct identification or the ratio of total 
27.29 	costs in paragraph (b) to the sum of total allowable salaries and the costs in paragraph (b).
27.30 	(d) The costs of housekeeping, plant operations and maintenance, real estate taxes, 
27.31 	special assessments, and insurance, other than the amounts classified as a fringe benefit, 
27.32 	must be allocated to the therapy service based on the ratio of service area square footage 
27.33 	to total facility square footage.
27.34 	(e) The costs of bookkeeping and medical records must be allocated to the therapy 
27.35 	service either by the method in paragraph (f) or based on direct identification. Direct 
28.1 	identification may be used if adequate documentation is provided to, and accepted by, 
28.2 	the commissioner.
28.3 	(f) The costs of administrators, bookkeeping, and medical records salaries, except 
28.4 	as provided in paragraph (e), must be allocated to the therapy service based on the ratio 
28.5 	of the total costs in paragraphs (b) to (e) to the sum of total allowable nursing facility 
28.6 	costs and the costs in paragraphs (b) to (e).
28.7 	(g) The cost of property must be allocated to the therapy service and removed from 
28.8 	the nursing facility's property-related payment rate, based on the ratio of service area square 
28.9 	footage to total facility square footage multiplied by the property-related payment rate.
28.10 		Subd. 9.Allocation of costs for therapy services; hospital-attached facilities.
 28.11 	To ensure the avoidance of double payments as required by section 256R.54, the direct 
28.12 	and indirect reporting period costs of providing therapy services to residents of a 
28.13 	hospital-attached nursing facility, when the services are billed separately from the nursing 
28.14 	facility's payment rate or according to Minnesota Rules, parts 9505.0170 to 9505.0475, 
28.15 	must be determined and deducted from the appropriate cost categories of the annual cost 
28.16 	report based on the Medicare step-down as prepared in accordance with instructions 
28.17 	provided by the commissioner.
28.18 		Subd. 10.Allocation of self-insurance costs.  For the rate year beginning on July 1, 
28.19 	1998, a group of nursing facilities related by common ownership that self-insures group 
28.20 	health, dental, or life insurance may allocate its directly identified costs of self-insuring its 
28.21 	Minnesota nursing facility workers among those nursing facilities in the group that are 
28.22 	reimbursed under this chapter. The method of cost allocation shall be based on the ratio 
28.23 	of each nursing facility's total allowable salaries and wages to that of the nursing facility 
28.24 	group's total allowable salaries and wages, then similarly allocated within each nursing 
28.25 	facility's operating cost categories. The costs associated with the administration of the 
28.26 	group's self-insurance plan must remain classified in the nursing facility's administrative 
28.27 	cost category. A written request of the nursing facility group's election to use this alternate 
28.28 	method of allocation of self-insurance costs must be received by the commissioner no later 
28.29 	than May 1, 1998, to take effect July 1, 1998, or those self-insurance costs shall continue to 
28.30 	be allocated under the existing cost allocation methods. Once a nursing facility group elects 
28.31 	this method of cost allocation for its group health, dental, or life insurance self-insurance 
28.32 	costs, it shall remain in effect until such time as the group no longer self-insures these costs.

28.33 	Sec. 13. [256R.13] AUDITING REQUIREMENTS.
28.34 		Subdivision 1.Audit authority. (a) The commissioner shall provide for an audit 
28.35 	of the cost and statistical data of nursing facilities participating as vendors of medical 
29.1 	assistance. The commissioner shall select for audit at least 15 percent of the nursing 
29.2 	facilities' data reported at random or using factors including, but not limited to: data 
29.3 	reported to the public as criteria for rating nursing facilities; data used to set limits for 
29.4 	other medical assistance programs or vendors of services to nursing facilities; change 
29.5 	in ownership; frequent changes in administration in excess of normal turnover rates; 
29.6 	complaints to the commissioner of health about care, safety, or rights; where previous 
29.7 	inspections or reinspections under section 144A.10 have resulted in correction orders 
29.8 	related to care, safety, or rights; or where persons involved in ownership or administration 
29.9 	of the facility have been indicted for alleged criminal activity.
29.10 	(b) The commissioner shall meet the 15 percent requirement by either conducting an 
29.11 	audit focused on an individual nursing facility, a group of facilities, or targeting specific 
29.12 	data categories in multiple nursing facilities. These audits may be conducted on site 
29.13 	at the nursing facility, at office space used by a nursing facility or a nursing facility's 
29.14 	parent organization, or at the commissioner's office. Data being audited may be collected 
29.15 	electronically, in person, or by any other means the commissioner finds acceptable.
29.16 		Subd. 2.Desk and field audits of statistical and cost reports. (a) The 
29.17 	commissioner may subject reports and supporting documentation to desk and field audits 
29.18 	to determine compliance with this chapter. Retroactive adjustments shall be made as 
29.19 	a result of desk or field audit findings if the cumulative impact of the finding would 
29.20 	result in a rate adjustment of at least 0.15 percent of the statewide weighted average 
29.21 	operating payment rate as determined in section 256R.09, subdivision 6. If a field audit 
29.22 	reveals inadequacies in a nursing facility's record keeping or accounting practices, the 
29.23 	commissioner may require the nursing facility to engage competent professional assistance 
29.24 	to correct those inadequacies within 90 days so that the field audit may proceed.
29.25 	(b) Field audits may cover the four most recent annual statistical and cost reports for 
29.26 	which desk audits have been completed and payment rates have been established. The 
29.27 	field audit must be an independent review of the nursing facility's statistical and cost 
29.28 	report. All transactions, invoices, or other documentation that support or relate to the 
29.29 	statistics and costs claimed on the annual statistical and cost reports are subject to review 
29.30 	by the field auditor. If the provider fails to provide the field auditor access to supporting 
29.31 	documentation related to the information reported on the statistical and cost report within 
29.32 	the time period specified by the commissioner, the commissioner shall calculate the total 
29.33 	payment rate by disallowing the cost of the items for which access to the supporting 
29.34 	documentation is not provided.
29.35 	(c) Changes in the total payment rate which result from desk or field audit adjustments 
29.36 	to statistical and cost reports for reporting periods earlier than the four most recent annual 
30.1 	cost reports must be made to the four most recent annual statistical and cost reports, the 
30.2 	current statistical and cost report, and future statistical and cost reports to the extent that 
30.3 	those adjustments affect the total payment rate established by those reporting years.
30.4 		Subd. 3.Audit adjustments. If the commissioner requests supporting 
30.5 	documentation during an audit for an item of cost reported by a nursing facility, and 
30.6 	the nursing facility's response does not adequately document the item of cost, the 
30.7 	commissioner may make reasoned assumptions considered appropriate in the absence of 
30.8 	the requested documentation to reasonably establish a payment rate rather than disallow the 
30.9 	entire item of cost. This subdivision shall not diminish the nursing facility's appeal rights.
30.10 		Subd. 4.Extended record retention requirements.  The commissioner shall extend 
30.11 	the period for retention of records under section 256R.09, subdivision 3, for purposes of 
30.12 	performing field audits as necessary to enforce sections 256R.04; 256R.05, subdivision 
30.13 	2; 256R.06, subdivisions 2, 6, and 7; 256R.08, subdivisions 1 to 3; and 256R.09, 
30.14 	subdivisions 3 and 4, with written notice to the facility postmarked no later than 90 days 
30.15 	prior to the expiration of the record retention requirement.

30.16 	Sec. 14. [256R.16] QUALITY OF CARE.
30.17 		Subdivision 1.Calculation of a quality score. (a) The commissioner shall 
30.18 	determine a quality score for each nursing facility using quality measures established in 
30.19 	section 256B.439, according to methods determined by the commissioner in consultation 
30.20 	with stakeholders and experts, and using the most recently available data as provided in 
30.21 	the Minnesota Nursing Home Report Card. These methods shall be exempt from the 
30.22 	rulemaking requirements under chapter 14.
30.23 	(b) For each quality measure, a score shall be determined with the number of points 
30.24 	assigned as determined by the commissioner using the methodology established according 
30.25 	to this subdivision. The determination of the quality measures to be used and the methods 
30.26 	of calculating scores may be revised annually by the commissioner.
30.27 	(c) The quality score shall include up to 50 points related to the Minnesota quality 
30.28 	indicators score derived from the minimum data set, up to 40 points related to the resident 
30.29 	quality of life score derived from the consumer survey conducted under section 256B.439, 
30.30 	subdivision 3, and up to ten points related to the state inspection results score.
30.31 	(d) The commissioner, in cooperation with the commissioner of health, may adjust 
30.32 	the formula in paragraph (c), or the methodology for computing the total quality score, 
30.33 	effective July 1 of any year, with five months advance public notice. In changing the 
30.34 	formula, the commissioner shall consider quality measure priorities registered by report 
30.35 	card users, advice of stakeholders, and available research.
31.1 		Subd. 2.Monitoring quality of care. If an annual cost report or field audit indicates 
31.2 	that expenditures for direct resident care have been reduced in amounts large enough to 
31.3 	indicate a possible detrimental effect on the quality of care, the commissioner shall notify 
31.4 	the commissioner of health.

31.5 	EFFECTIVE DATE. Subdivision 1, paragraph (d), is effective February 1, 2017.

31.6 	Sec. 15. [256R.17] CASE MIX.
31.7 		Subdivision 1.Case mix classifications. The case mix classifications shall be 
31.8 	those established under section 144.0724.
31.9 		Subd. 2.Case mix indices. (a) The commissioner shall assign a case mix index to 
31.10 	each case mix classification based on the Centers for Medicare and Medicaid Services 
31.11 	staff time measurement study.
31.12 	(b) An index maximization approach shall be used to classify residents. "Index 
31.13 	maximization" has the meaning given in section 144.0724, subdivision 2, paragraph (c).
31.14 		Subd. 3.Resident assessment schedule. (a) Nursing facilities shall conduct and 
31.15 	submit case mix classification assessments according to the schedule established by the 
31.16 	commissioner of health under section 144.0724, subdivisions 4 and 5.
31.17 	(b) The case mix classifications established under section 144.0724, subdivision 3a, 
31.18 	shall be effective the day of admission for new admission assessments. The effective date 
31.19 	for significant change assessments shall be the assessment reference date. The effective 
31.20 	date for annual and quarterly assessments shall be the first day of the month following 
31.21 	assessment reference date.
31.22 		Subd. 4.Notice of resident reimbursement case mix classification. Nursing 
31.23 	facilities shall provide notice to a resident of the resident's case mix classification 
31.24 	according to procedures established by the commissioner of health under section 
31.25 	144.0724, subdivision 7.
31.26 		Subd. 5.Reconsideration of resident case mix classification. Any request for 
31.27 	reconsideration of a resident case mix classification must be made under section 144.0724, 
31.28 	subdivision 8.
31.29 	RATE STRUCTURE/RATE CALCULATION

31.30 	Sec. 16. [256R.21] TOTAL PAYMENT RATE.
31.31 		Subdivision 1.Total payment rates. For each facility, the commissioner shall 
31.32 	calculate a total payment rate using the statistical and cost report filed by each nursing 
31.33 	facility for the reporting period ending 15 months prior to the rate year.
32.1 	The total payment rates are the total payment rates in effect on the first day of the 
32.2 	rate year, unless another date is specified.
32.3 		Subd. 2.Determination of total care-related payment rates. A facility's total 
32.4 	care-related payment rate is the sum of:
32.5 	(1) its direct care payment rate as determined in section 256R.23, subdivision 7; and
32.6 	(2) its other care-related payment rate as determined in section 256R.23, subdivision 
32.7 	8.
32.8 	A facility's total care-related payment rate is its total care-related payment rate 
32.9 	associated with a case mix index of 1.00.
32.10 		Subd. 3.Determination of operating payment rates. A facility's operating 
32.11 	payment rate is the sum of:
32.12 	(1) its total care-related payment rate as determined in subdivision 2; and
32.13 	(2) its other operating payment rate as determined in section 256R.24.
32.14 	A facility's operating payment rate is its operating payment rate associated with a 
32.15 	case mix index of 1.00.
32.16 		Subd. 4.Determination of total payment rates. A facility's total payment rate 
32.17 	is the sum of:
32.18 	(1) its operating payment rate as determined in subdivision 3;
32.19 	(2) its external fixed costs payment rate as determined in section 256R.25; and
32.20 	(3) its property payment rate as determined in section 256R.26.
32.21 	A facility's total payment rate is its total payment rate associated with a case mix 
32.22 	index of 1.00.

32.23 	Sec. 17. [256R.22] CASE MIX ADJUSTED TOTAL PAYMENT RATE.
32.24 		Subdivision 1.Case mix adjusted payment rates generally. For each facility, 
32.25 	the commissioner shall calculate case mix adjusted payment rates for each case mix 
32.26 	classification.
32.27 		Subd. 2.Determination of case mix adjusted total care-related payment 
32.28 	rates. A facility's case mix adjusted total care-related payment rate for each case mix 
32.29 	classification is the sum of:
32.30 	(1) its direct care payment rate as determined in section 256R.23, subdivision 7, 
32.31 	multiplied by the case mix index; and
32.32 	(2) its other care-related payment rate as determined in section 256R.23, subdivision 
32.33 	8.
33.1 		Subd. 3.Determination of case mix adjusted operating payment rates. A 
33.2 	facility's case mix adjusted operating payment rate for each case mix classification is 
33.3 	the sum of:
33.4 	(1) its case mix adjusted total care-related payment rate as determined in subdivision 
33.5 	2; and
33.6 	(2) its other operating payment rate as determined in section 256R.24.
33.7 		Subd. 4.Determination of case mix adjusted total payment rates. A facility's 
33.8 	case mix adjusted total payment rate for each case mix classification is the sum of:
33.9 	(1) its case mix adjusted operating payment rate as determined in subdivision 3;
33.10 	(2) its external fixed costs payment rate as determined in section 256R.25; and
33.11 	(3) its property payment rate as determined in section 256R.26.

33.12 	Sec. 18. [256R.23] TOTAL CARE-RELATED PAYMENT RATES.
33.13 		Subdivision 1.Determination of total care-related cost per day. Each facility's 
33.14 	total care-related cost per day is the sum of its direct care cost per standardized day and 
33.15 	its other care-related cost per resident day.
33.16 		Subd. 2.Calculation of direct care cost per standardized day. Each facility's 
33.17 	direct care cost per standardized day is the facility's direct care costs divided by the sum of 
33.18 	the facility's standardized days. A facility's direct care cost per standardized day is the 
33.19 	facility's cost per day for direct care services associated with a case mix index of 1.00.
33.20 		Subd. 3.Calculation of other care-related cost per resident day. Each facility's 
33.21 	other care-related cost per resident day is its other care-related costs, divided by the sum 
33.22 	of the facility's resident days.
33.23 		Subd. 4.Determination of the median total care-related cost per day. The 
33.24 	commissioner must determine the median total care-related cost per day using the cost 
33.25 	reports from nursing facilities in Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and 
33.26 	Washington Counties.
33.27 		Subd. 5.Determination of total care-related payment rate limits. The 
33.28 	commissioner must determine each facility's total care-related payment rate limit by:
33.29 	(1) multiplying the facility's quality score, as determined under section 256R.16, 
33.30 	subdivision 1, by 0.5625;
33.31 	(2) adding 89.375 to the amount determined in clause (1), and dividing the total by 
33.32 	100; and
33.33 	(3) multiplying the amount determined in clause (2) by the median total care-related 
33.34 	cost per day.
34.1 		Subd. 6.Payment rate limit reduction. No facility shall be subject in any rate year 
34.2 	to a care-related payment rate limit reduction greater than five percent of the median 
34.3 	determined in subdivision 4.
34.4 		Subd. 7.Determination of direct care payment rates. A facility's direct care 
34.5 	payment rate equals the lesser of (1) the facility's direct care costs per standardized day, or 
34.6 	(2) the facility's direct care costs per standardized day divided by its cost to limit ratio.
34.7 		Subd. 8.Determination of other care-related payment rates. A facility's other 
34.8 	care-related payment rate equals the lesser of (1) the facility's other care-related cost per 
34.9 	resident day, or (2) the facility's other care-related cost per resident day divided by its 
34.10 	cost to limit ratio.
34.11 		Subd. 9.Determination of total care-related payment rates. A facility's total 
34.12 	care-related payment rate is the sum of its direct care payment rate as determined in 
34.13 	subdivision 7 and its other care-related payment rate as determined in subdivision 8.

34.14 	Sec. 19. [256R.24] OTHER OPERATING PAYMENT RATE.
34.15 		Subdivision 1.Determination of other operating cost per day. Each facility's 
34.16 	other operating cost per day is its other operating costs divided by the sum of the facility's 
34.17 	resident days.
34.18 		Subd. 2.Determination of the median other operating cost per day. The 
34.19 	commissioner must determine the median other operating cost per day using the cost 
34.20 	reports from nursing facilities in Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and 
34.21 	Washington Counties.
34.22 		Subd. 3.Determination of the other operating payment rate. A facility's other 
34.23 	operating payment rate equals 105 percent of the median other operating cost per day.

34.24 	Sec. 20. [256R.25] EXTERNAL FIXED COSTS PAYMENT RATE.
34.25 	(a) The payment rate for external fixed costs is the sum of the amounts in paragraphs 
34.26 	(b) to (m).
34.27 	(b) For a facility licensed as a nursing home, the portion related to the provider 
34.28 	surcharge under section 256.9657 is equal to $8.86 per resident day. For a facility licensed 
34.29 	as both a nursing home and a boarding care home, the portion related to the provider 
34.30 	surcharge under section 256.9657 is equal to $8.86 per resident day multiplied by the 
34.31 	result of its number of nursing home beds divided by its total number of licensed beds.
34.32 	(c) The portion related to the licensure fee under section 144.122, paragraph (d), is 
34.33 	the amount of the fee divided by the sum of the facility's resident days.
35.1 	(d) The portion related to development and education of resident and family advisory 
35.2 	councils under section 144A.33 is $5 per resident day divided by 365.
35.3 	(e) The portion related to scholarships is determined under section 256R.37.
35.4 	(f) The portion related to planned closure rate adjustments is as determined under 
35.5 	section 256R.40, subdivision 5, and Minnesota Statutes 2010, section 256B.436.
35.6 	(g) The portion related to single-bed room incentives is as determined under section 
35.7 	256R.41.
35.8 	(h) The portions related to real estate taxes, special assessments, and payments made 
35.9 	in lieu of real estate taxes directly identified or allocated to the nursing facility are the 
35.10 	actual amounts divided by the sum of the facility's resident days. Allowable costs under 
35.11 	this paragraph for payments made by a nonprofit nursing facility that are in lieu of real 
35.12 	estate taxes shall not exceed the amount which the nursing facility would have paid to 
35.13 	a city or township and county for fire, police, sanitation services, and road maintenance 
35.14 	costs had real estate taxes been levied on that property for those purposes.
35.15 	(i) The portion related to employer health insurance costs is the allowable costs 
35.16 	divided by the sum of the facility's resident days.
35.17 	(j) The portion related to the Public Employees Retirement Association is actual 
35.18 	costs divided by the sum of the facility's resident days.
35.19 	(k) The portion related to quality improvement incentive payment rate adjustments 
35.20 	is the amount determined under section 256R.39.
35.21 	(l) The portion related to performance-based incentive payments is the amount 
35.22 	determined under section 256R.38.
35.23 	(m) The portion related to special dietary needs is the amount determined under 
35.24 	section 256R.51.

35.25 	Sec. 21. [256R.26] PROPERTY PAYMENT RATE.
35.26 	The property payment rate for a nursing facility is the property rate established for 
35.27 	the facility under sections 256B.431 and 256B.434.

35.28 	Sec. 22. [256R.32] APPEALS.
35.29 	Nursing facilities may appeal, as described under section 256B.50, the determination 
35.30 	of a payment rate established under this chapter.
35.31 	ADJUSTMENTS AND ADD-ONS TO THE TOTAL PAYMENT RATE

35.32 	Sec. 23. [256R.36] HOLD HARMLESS.
36.1 	No nursing facility's operating payment rate, plus its employer health insurance 
36.2 	costs portion of the external fixed costs payment rate, will be less than its prior system 
36.3 	operating cost payment rate.

36.4 	Sec. 24. [256R.37] SCHOLARSHIPS.
36.5 	(a) For the 27-month period beginning October 1, 2015, through December 31, 
36.6 	2017, the commissioner shall allow a scholarship per diem of up to 25 cents for each 
36.7 	nursing facility with no scholarship per diem that is requesting a scholarship per diem to 
36.8 	be added to the external fixed payment rate to be used:
36.9 	(1) for employee scholarships that satisfy the following requirements:
36.10 	(i) scholarships are available to all employees who work an average of at least ten 
36.11 	hours per week at the facility except the administrator, and to reimburse student loan 
36.12 	expenses for newly hired and recently graduated registered nurses and licensed practical 
36.13 	nurses, and training expenses for nursing assistants as defined in section 144A.611, 
36.14 	subdivision 2, who are newly hired and have graduated within the last 12 months; and
36.15 	(ii) the course of study is expected to lead to career advancement with the facility or 
36.16 	in long-term care, including medical care interpreter services and social work; and
36.17 	(2) to provide job-related training in English as a second language.
36.18 	(b) All facilities may annually request a rate adjustment under this section by 
36.19 	submitting information to the commissioner on a schedule and in a form supplied by the 
36.20 	commissioner. The commissioner shall allow a scholarship payment rate equal to the 
36.21 	reported and allowable costs divided by resident days.
36.22 	(c) In calculating the per diem under paragraph (b), the commissioner shall allow 
36.23 	costs related to tuition, direct educational expenses, and reasonable costs as defined by the 
36.24 	commissioner for child care costs and transportation expenses related to direct educational 
36.25 	expenses.
36.26 	(d) The rate increase under this section is an optional rate add-on that the facility 
36.27 	must request from the commissioner in a manner prescribed by the commissioner. The 
36.28 	rate increase must be used for scholarships as specified in this section.
36.29 	(e) For instances in which a rate adjustment will be 15 cents or greater, nursing 
36.30 	facilities that close beds during a rate year may request to have their scholarship 
36.31 	adjustment under paragraph (b) recalculated by the commissioner for the remainder of the 
36.32 	rate year to reflect the reduction in resident days compared to the cost report year.

36.33 	Sec. 25. [256R.38] PERFORMANCE-BASED INCENTIVE PAYMENTS.
37.1 	The commissioner shall develop additional incentive-based payments of up to 
37.2 	five percent above a facility's operating payment rate for achieving outcomes specified 
37.3 	in a contract. The commissioner may solicit proposals and select those which, on a 
37.4 	competitive basis, best meet the state's policy objectives. The commissioner shall limit 
37.5 	the amount of any incentive payment and the number of contract amendments under this 
37.6 	section to operate the incentive payments within funds appropriated for this purpose. 
37.7 	The commissioner shall approve proposals through a memorandum of understanding 
37.8 	which shall specify various levels of payment for various levels of performance. Incentive 
37.9 	payments to facilities under this section shall be in the form of time-limited rate 
37.10 	adjustments which shall be included in the external fixed payment rate under section 
37.11 	256R.25. In establishing the specified outcomes and related criteria, the commissioner 
37.12 	shall consider the following state policy objectives:
37.13 	(1) successful diversion or discharge of residents to the residents' prior home or other 
37.14 	community-based alternatives;
37.15 	(2) adoption of new technology to improve quality or efficiency;
37.16 	(3) improved quality as measured in the Minnesota Nursing Home Report Card;
37.17 	(4) reduced acute care costs; and
37.18 	(5) any additional outcomes proposed by a nursing facility that the commissioner 
37.19 	finds desirable.

37.20 	Sec. 26. [256R.39] QUALITY IMPROVEMENT INCENTIVE PROGRAM.
37.21 	The commissioner shall develop a quality improvement incentive program in 
37.22 	consultation with stakeholders. The annual funding pool available for quality improvement 
37.23 	incentive payments shall be equal to 0.8 percent of all operating payments, not including 
37.24 	any rate components resulting from equitable cost-sharing for publicly owned nursing 
37.25 	facility program participation under section 256R.48, critical access nursing facility 
37.26 	program participation under section 256R.47, or performance-based incentive payment 
37.27 	program participation under section 256R.38. For the period from October 1, 2015, to 
37.28 	December 31, 2016, rate adjustments provided under this section shall be effective for 
37.29 	15 months. Beginning January 1, 2017, annual rate adjustments provided under this 
37.30 	section shall be effective for one rate year.

37.31 	Sec. 27. [256R.40] NURSING FACILITY VOLUNTARY CLOSURE; 
37.32 	ALTERNATIVES.
37.33 		Subdivision 1.Definitions. (a) The definitions in this subdivision apply to this 
37.34 	section.
38.1 	(b) "Closure" means the cessation of operations of a nursing facility and delicensure 
38.2 	and decertification of all beds within the facility.
38.3 	(c) "Closure plan" means a plan to close a nursing facility and reallocate a portion of 
38.4 	the resulting savings to provide planned closure rate adjustments at other facilities.
38.5 	(d) "Commencement of closure" means the date on which residents and designated 
38.6 	representatives are notified of a planned closure as provided in section 144A.161, 
38.7 	subdivision 5a, as part of an approved closure plan.
38.8 	(e) "Completion of closure" means the date on which the final resident of the nursing 
38.9 	facility designated for closure in an approved closure plan is discharged from the facility.
38.10 	(f) "Partial closure" means the delicensure and decertification of a portion of the 
38.11 	beds within the facility.
38.12 	(g) "Planned closure rate adjustment" means an increase in a nursing facility's 
38.13 	operating rates resulting from a planned closure or a planned partial closure of another 
38.14 	facility.
38.15 		Subd. 2.Applications for planned closure rate. (a) To be considered for approval 
38.16 	of a planned closure, an application must include:
38.17 	(1) a description of the proposed closure plan, which must include identification of 
38.18 	the facility or facilities to receive a planned closure rate adjustment;
38.19 	(2) the proposed timetable for any proposed closure, including the proposed dates 
38.20 	for announcement to residents, commencement of closure, and completion of closure;
38.21 	(3) if available, the proposed relocation plan for current residents of any facility 
38.22 	designated for closure. If a relocation plan is not available, the application must include a 
38.23 	statement agreeing to develop a relocation plan designed to comply with section 144A.161;
38.24 	(4) a description of the relationship between the nursing facility that is proposed for 
38.25 	closure and the nursing facility or facilities proposed to receive the planned closure rate 
38.26 	adjustment. If these facilities are not under common ownership, copies of any contracts, 
38.27 	purchase agreements, or other documents establishing a relationship or proposed 
38.28 	relationship must be provided; and
38.29 	(5) documentation, in a format approved by the commissioner, that all the nursing 
38.30 	facilities receiving a planned closure rate adjustment under the plan have accepted joint 
38.31 	and several liability for recovery of overpayments under section 256B.0641, subdivision 
38.32 	2, for the facilities designated for closure under the plan.
38.33 	(b) The application must also address the criteria listed in subdivision 3.
38.34 		Subd. 3.Criteria for review of application.  In reviewing and approving closure 
38.35 	proposals, the commissioner shall consider, but not be limited to, the following criteria:
38.36 	(1) improved quality of care and quality of life for consumers;
39.1 	(2) closure of a nursing facility that has a poor physical plant;
39.2 	(3) the existence of excess nursing facility beds, measured in terms of beds per 
39.3 	thousand persons aged 85 or older. The excess must be measured in reference to:
39.4 	(i) the county in which the facility is located. A facility in a county that is in the 
39.5 	lowest quartile of counties with reference to beds per thousand persons aged 85 or older is 
39.6 	not in an area of excess capacity;
39.7 	(ii) the county and all contiguous counties;
39.8 	(iii) the region in which the facility is located; or
39.9 	(iv) the facility's service area. The facility shall indicate in its application the service 
39.10 	area it believes is appropriate for this measurement;
39.11 	(4) low-occupancy rates, provided that the unoccupied beds are not the result of 
39.12 	a personnel shortage. In analyzing occupancy rates, the commissioner shall examine 
39.13 	waiting lists in the applicant facility and at facilities in the surrounding area, as determined 
39.14 	under clause (3);
39.15 	(5) evidence of coordination between the community planning process and the 
39.16 	facility application. If the planning group does not support a level of nursing facility 
39.17 	closures that the commissioner considers to be reasonable, the commissioner may approve 
39.18 	a planned closure proposal without its support;
39.19 	(6) proposed usage of funds available from a planned closure rate adjustment for 
39.20 	care-related purposes;
39.21 	(7) innovative use planned for the closed facility's physical plant;
39.22 	(8) evidence that the proposal serves the interests of the state; and
39.23 	(9) evidence of other factors that affect the viability of the facility, including 
39.24 	excessive nursing pool costs.
39.25 		Subd. 4.Review and approval of applications. (a) The commissioner, in 
39.26 	consultation with the commissioner of health, shall approve or deny an application within 
39.27 	30 days after receiving it. The commissioner may appoint an advisory review panel 
39.28 	composed of representatives of counties, consumers, and providers to review proposals 
39.29 	and provide comments and recommendations to the committee. The commissioners of 
39.30 	human services and health shall provide staff and technical assistance to the committee 
39.31 	for the review and analysis of proposals.
39.32 	(b) Approval of a planned closure expires 18 months after approval by the 
39.33 	commissioner unless commencement of closure has begun.
39.34 	(c) The commissioner may change any provision of the application to which the 
39.35 	applicant, the regional planning group, and the commissioner agree.
40.1 		Subd. 5.Planned closure rate adjustment. (a) The commissioner shall calculate 
40.2 	the amount of the planned closure rate adjustment available under subdivision 6 according 
40.3 	to clauses (1) to (4):
40.4 	(1) the amount available is the net reduction of nursing facility beds multiplied 
40.5 	by $2,080;
40.6 	(2) the total number of beds in the nursing facility or facilities receiving the planned 
40.7 	closure rate adjustment must be identified;
40.8 	(3) capacity days are determined by multiplying the number determined under 
40.9 	clause (2) by 365; and
40.10 	(4) the planned closure rate adjustment is the amount available in clause (1), divided 
40.11 	by capacity days determined under clause (3).
40.12 	(b) A planned closure rate adjustment under this section is effective on the first day 
40.13 	of the month following completion of closure of the facility designated for closure in the 
40.14 	application and becomes part of the nursing facility's external fixed payment rate. 
40.15 	(c) Upon the request of a closing facility, the commissioner must allow the facility a 
40.16 	closure rate adjustment as provided under section 144A.161, subdivision 10.
40.17 	(d) A facility that has received a planned closure rate adjustment may reassign it 
40.18 	to another facility that is under the same ownership at any time within three years of its 
40.19 	effective date. The amount of the adjustment is computed according to paragraph (a).
40.20 	(e) If the per bed dollar amount specified in paragraph (a), clause (1), is increased, 
40.21 	the commissioner shall recalculate planned closure rate adjustments for facilities that 
40.22 	delicense beds under this section on or after July 1, 2001, to reflect the increase in the per 
40.23 	bed dollar amount. The recalculated planned closure rate adjustment is effective from the 
40.24 	date the per bed dollar amount is increased.
40.25 		Subd. 6.Assignment of closure rate to another facility.  A facility or facilities 
40.26 	reimbursed under this chapter with a closure plan approved by the commissioner under 
40.27 	subdivision 4 may assign a planned closure rate adjustment to another facility or facilities 
40.28 	that are not closing or in the case of a partial closure, to the facility undertaking the partial 
40.29 	closure. A facility may also elect to have a planned closure rate adjustment shared equally 
40.30 	by the five nursing facilities with the lowest total operating payment rates in the state 
40.31 	development region designated under section 462.385, in which the facility that is closing 
40.32 	is located. The planned closure rate adjustment must be calculated under subdivision 5. 
40.33 	Facilities that delicense beds without a closure plan, or whose closure plan is not approved 
40.34 	by the commissioner, are not eligible to assign a planned closure rate adjustment under 
40.35 	subdivision 5, unless they: (1) are delicensing five or fewer beds, or less than six percent 
40.36 	of their total licensed bed capacity, whichever is greater; (2) are located in a county in 
41.1 	the top three quartiles of beds per 1,000 persons aged 65 or older; and (3) have not 
41.2 	delicensed beds in the prior three months. Facilities meeting these criteria are eligible to 
41.3 	assign the amount calculated under subdivision 5 to themselves. If a facility is delicensing 
41.4 	the greater of six or more beds, or six percent or more of its total licensed bed capacity, 
41.5 	and does not have an approved closure plan or is not eligible for the adjustment under 
41.6 	subdivision 5, the commissioner shall calculate the amount the facility would have been 
41.7 	eligible to assign under subdivision 5, and shall use this amount to provide equal rate 
41.8 	adjustments to the five nursing facilities with the lowest total operating payment rates in 
41.9 	the state development region designated under section 462.385, in which the facility 
41.10 	that delicensed beds is located.
41.11 		Subd. 7.Other rate adjustments. Facilities receiving planned closure rate 
41.12 	adjustments remain eligible for any applicable rate adjustments provided under this chapter.

41.13 	Sec. 28. [256R.41] SINGLE-BED ROOM INCENTIVE.
41.14 	(a) Beginning July 1, 2005, the operating payment rate for nursing facilities 
41.15 	reimbursed under this chapter shall be increased by 20 percent multiplied by the ratio of 
41.16 	the number of new single-bed rooms created divided by the number of active beds on 
41.17 	July 1, 2005, for each bed closure that results in the creation of a single-bed room after 
41.18 	July 1, 2005. The commissioner may implement rate adjustments for up to 3,000 new 
41.19 	single-bed rooms each year. For eligible bed closures for which the commissioner receives 
41.20 	a notice from a facility during a calendar quarter that a bed has been delicensed and a 
41.21 	new single-bed room has been established, the rate adjustment in this paragraph shall be 
41.22 	effective on the first day of the second month following that calendar quarter. 
41.23 	(b) A nursing facility is prohibited from discharging residents for purposes of 
41.24 	establishing single-bed rooms. A nursing facility must submit documentation to the 
41.25 	commissioner in a form prescribed by the commissioner, certifying the occupancy status 
41.26 	of beds closed to create single-bed rooms. In the event that the commissioner determines 
41.27 	that a facility has discharged a resident for purposes of establishing a single-bed room, the 
41.28 	commissioner shall not provide a rate adjustment under paragraph (a).

41.29 	Sec. 29. [256R.42] RATE ADJUSTMENT FOR THE FIRST 30 DAYS.
41.30 	(a) During the first 30 calendar days after admission, the total payment rate for a case 
41.31 	mix classification must be increased by 20 percent. Beginning with the 31st calendar day 
41.32 	after admission, the total payment rate is the rate otherwise determined under this chapter.
41.33 	(b) The enhanced rates under this section shall not be allowed if a resident has 
41.34 	resided during the previous 30 calendar days in:
42.1 	(1) the same nursing facility;
42.2 	(2) a nursing facility owned or operated by a related party; or
42.3 	(3) a nursing facility or part of a facility that closed or was in the process of closing.

42.4 	Sec. 30. [256R.43] BED HOLDS.
42.5 	The commissioner shall limit payment for leave days in a nursing facility to 30 
42.6 	percent of that nursing facility's total payment rate for the involved resident, and shall allow 
42.7 	this payment only when the occupancy of the nursing facility, inclusive of bed hold days, 
42.8 	is equal to or greater than 96 percent, notwithstanding Minnesota Rules, part 9505.0415.

42.9 	Sec. 31. [256R.44] RATE ADJUSTMENT FOR PRIVATE ROOMS FOR 
42.10 	MEDICAL NECESSITY.
42.11 	The amount paid for a private room is 111.5 percent of the established total payment 
42.12 	rate for a resident if the resident is a medical assistance recipient and the private room is 
42.13 	considered a medical necessity for the resident or others who are affected by the resident's 
42.14 	condition, except as provided in Minnesota Rules, part 9549.0060, subpart 11, item C. 
42.15 	Conditions requiring a private room must be determined by the resident's attending 
42.16 	physician and submitted to the commissioner for approval or denial by the commissioner 
42.17 	on the basis of medical necessity.

42.18 	Sec. 32. [256R.45] RATE ADJUSTMENT FOR VENTILATOR-DEPENDENT 
42.19 	PERSONS.
42.20 	The commissioner may negotiate with a nursing facility eligible to receive medical 
42.21 	assistance payments to provide services to a ventilator-dependent person identified by the 
42.22 	commissioner according to criteria developed by the commissioner, including:
42.23 	(1) nursing facility care has been recommended for the person by a preadmission 
42.24 	screening team;
42.25 	(2) the person has been hospitalized and no longer requires inpatient acute care 
42.26 	hospital services; and
42.27 	(3) the commissioner has determined that necessary services for the person cannot 
42.28 	be provided under existing nursing facility rates.
42.29 	The commissioner may negotiate an adjustment to the operating payment rate 
42.30 	for a nursing facility with a resident who is ventilator-dependent, for that resident. 
42.31 	The negotiated adjustment must reflect only the actual additional cost of meeting the 
42.32 	specialized care needs of a ventilator-dependent person identified by the commissioner 
42.33 	for whom necessary services cannot be provided under existing nursing facility rates and 
43.1 	which are not otherwise covered under Minnesota Rules, parts 9549.0010 to 9549.0080 or 
43.2 	9505.0170 to 9505.0475. The negotiated payment rate must not exceed 300 percent of 
43.3 	the case mix adjusted operating payment rate for the highest case mix classification. The 
43.4 	negotiated adjustment shall not affect the payment rate charged to private paying residents 
43.5 	under the provisions of section 256R.06, subdivision 2.

43.6 	Sec. 33. [256R.46] SPECIALIZED CARE FACILITIES.
43.7 	(a) The total care-related payment rate limit for specialized care facilities shall be 
43.8 	increased by 50 percent.
43.9 	(b) "Specialized care facilities" are defined as a facility having a program licensed 
43.10 	under chapter 245A and Minnesota Rules, chapter 9570, or a facility with 96 beds on 
43.11 	January 1, 2015, located in Robbinsdale that specializes in the treatment of Huntington's 
43.12 	Disease.

43.13 	Sec. 34. [256R.47] RATE ADJUSTMENT FOR CRITICAL ACCESS NURSING 
43.14 	FACILITIES.
43.15 	(a) The commissioner, in consultation with the commissioner of health, may 
43.16 	designate certain nursing facilities as critical access nursing facilities. The designation shall 
43.17 	be granted on a competitive basis, within the limits of funds appropriated for this purpose.
43.18 	(b) The commissioner shall request proposals from nursing facilities every two years. 
43.19 	Proposals must be submitted in the form and according to the timelines established by 
43.20 	the commissioner. In selecting applicants to designate, the commissioner, in consultation 
43.21 	with the commissioner of health, and with input from stakeholders, shall develop criteria 
43.22 	designed to preserve access to nursing facility services in isolated areas, rebalance 
43.23 	long-term care, and improve quality. To the extent practicable, the commissioner shall 
43.24 	ensure an even distribution of designations across the state.
43.25 	(c) The commissioner shall allow the benefits in clauses (1) to (5) for nursing 
43.26 	facilities designated as critical access nursing facilities:
43.27 	(1) partial rebasing, with the commissioner allowing a designated facility operating 
43.28 	payment rates being the sum of up to 60 percent of the operating payment rate determined 
43.29 	in accordance with section 256R.21, subdivision 3, and at least 40 percent, with the sum of 
43.30 	the two portions being equal to 100 percent, of the operating payment rate that would have 
43.31 	been allowed had the facility not been designated. The commissioner may adjust these 
43.32 	percentages by up to 20 percent and may approve a request for less than the amount allowed;
43.33 	(2) enhanced payments for leave days. Notwithstanding section 256R.43, upon 
43.34 	designation as a critical access nursing facility, the commissioner shall limit payment for 
44.1 	leave days to 60 percent of that nursing facility's total payment rate for the involved 
44.2 	resident, and shall allow this payment only when the occupancy of the nursing facility, 
44.3 	inclusive of bed hold days, is equal to or greater than 90 percent;
44.4 	(3) two designated critical access nursing facilities, with up to 100 beds in active 
44.5 	service, may jointly apply to the commissioner of health for a waiver of Minnesota 
44.6 	Rules, part 4658.0500, subpart 2, in order to jointly employ a director of nursing. The 
44.7 	commissioner of health shall consider each waiver request independently based on the 
44.8 	criteria under Minnesota Rules, part 4658.0040;
44.9 	(4) the minimum threshold under section 256B.431, subdivision 15, paragraph (e), 
44.10 	shall be 40 percent of the amount that would otherwise apply; and
44.11 	(5) the quality-based rate limits under section 256R.23, subdivisions 5 to 7, apply to 
44.12 	designated critical access nursing facilities.
44.13 	(d) Designation of a critical access nursing facility is for a period of two years, after 
44.14 	which the benefits allowed under paragraph (c) shall be removed. Designated facilities 
44.15 	may apply for continued designation.
44.16 	(e) This section is suspended and no state or federal funding shall be appropriated or 
44.17 	allocated for the purposes of this section from January 1, 2016, to December 31, 2017.

44.18 	Sec. 35. [256R.48] PUBLICLY OWNED FACILITIES.
44.19 	(a) The commissioner shall allow nursing facilities whose physical plant is owned or 
44.20 	whose license is held by a city, county, or hospital district to apply for a higher payment 
44.21 	rate under this section if the local governmental entity agrees to pay a specified portion of 
44.22 	the nonfederal share of medical assistance costs. Nursing facilities that apply are eligible 
44.23 	to select an operating payment rate with a case mix index of 1.00, up to an amount 
44.24 	determined by the commissioner to be allowable under the Medicare upper payment limit 
44.25 	test. The case mix adjusted rates shall be computed under section 256R.22. The rate 
44.26 	increase allowed in this paragraph shall take effect only upon federal approval.
44.27 	(b) Rates determined under this section shall take effect in accordance with the rate 
44.28 	year in section 256R.02, subdivision 41, based on the most recent available cost report.
44.29 	(c) Eligible nursing facilities that wish to participate under this section shall make 
44.30 	an application to the commissioner by September 30 to be allowed participation on the 
44.31 	following January 1.
44.32 	(d) For each participating nursing facility, the public entity that owns the physical 
44.33 	plant or is the license holder of the nursing facility shall pay to the state the entire 
44.34 	nonfederal share of medical assistance payments received as a result of the difference 
44.35 	between the nursing facility's payment rate under this section, and the rates that the 
45.1 	nursing facility would otherwise be paid without application of this section under section 
45.2 	256R.21 as determined by the commissioner.
45.3 	(e) The commissioner may, at any time, reduce the payments under this section 
45.4 	based on the commissioner's determination that the payments shall cause nursing facility 
45.5 	rates to exceed the state's Medicare upper payment limit or any other federal limitation. If 
45.6 	the commissioner determines a reduction is necessary, the commissioner shall reduce all 
45.7 	payment rates for participating nursing facilities by a percentage applied to the amount of 
45.8 	increase they would otherwise receive under this section and shall notify participating 
45.9 	facilities of the reductions. If payments to a nursing facility are reduced, payments under 
45.10 	section 256B.19, subdivision 1e, shall be reduced accordingly.

45.11 	Sec. 36. [256R.49] RATE ADJUSTMENTS FOR COMPENSATION-RELATED 
45.12 	COSTS FOR MINIMUM WAGE CHANGES.
45.13 		Subdivision 1.Rate adjustments for compensation-related costs. (a) Operating 
45.14 	payment rates of all nursing facilities that are reimbursed under this chapter shall be 
45.15 	increased effective for rate years beginning on and after October 1, 2014, to address 
45.16 	changes in compensation costs for nursing facility employees paid less than $14 per hour 
45.17 	in accordance with this section.
45.18 	(b) Nursing facilities that receive approval of the applications in subdivision 2 must 
45.19 	receive rate adjustments according to subdivision 4. The rate adjustments must be used to 
45.20 	pay compensation costs for nursing facility employees paid less than $14 per hour.
45.21 		Subd. 2.Application process.  To receive a rate adjustment, nursing facilities 
45.22 	must submit applications to the commissioner in a form and manner determined by 
45.23 	the commissioner. The applications for the rate adjustments shall include specified 
45.24 	data, and spending plans that describe how the funds from the rate adjustments will be 
45.25 	allocated for compensation to employees paid less than $14 per hour. The applications 
45.26 	must be submitted within three months of the effective date of any operating payment rate 
45.27 	adjustment under this section. The commissioner may request any additional information 
45.28 	needed to determine the rate adjustment within three weeks of receiving a complete 
45.29 	application. The nursing facility must provide any additional information requested by 
45.30 	the commissioner within six months of the effective date of any operating payment rate 
45.31 	adjustment under this section. The commissioner may waive the deadlines in this section 
45.32 	under extraordinary circumstances.
45.33 		Subd. 3.Additional application requirements for facilities with employees 
45.34 	represented by an exclusive bargaining representative.  For nursing facilities in which 
45.35 	employees are represented by an exclusive bargaining representative, the commissioner 
46.1 	shall approve the applications submitted under subdivision 2 only upon receipt of a letter 
46.2 	or letters of acceptance of the spending plans in regard to members of the bargaining unit, 
46.3 	signed by the exclusive bargaining agent and dated after May 31, 2014. Upon receipt of 
46.4 	the letter or letters of acceptance, the commissioner shall deem all requirements of this 
46.5 	section as having been met in regard to the members of the bargaining unit.
46.6 		Subd. 4.Determination of the rate adjustments for compensation-related costs. 
46.7 	 Based on the application in subdivision 2, the commissioner shall calculate the allowable 
46.8 	annualized compensation costs by adding the totals of clauses (1), (2), and (3). The result 
46.9 	must be divided by the standardized or resident days from the most recently available cost 
46.10 	report to determine per day amounts, which must be included in the operating portion of 
46.11 	the total payment rate and allocated to direct care or other operating as determined by 
46.12 	the commissioner:
46.13 	(1) the sum of the difference between $9.50 and any hourly wage rate less than $9.50 
46.14 	for October 1, 2016; and between the indexed value of the minimum wage, as defined in 
46.15 	section 177.24, subdivision 1, paragraph (f), and any hourly wage less than that indexed 
46.16 	value for rate years beginning on and after October 1, 2017; multiplied by the number 
46.17 	of compensated hours at that wage rate;
46.18 	(2) using wages and hours in effect during the first three months of calendar year 
46.19 	2014, beginning with the first pay period beginning on or after January 1, 2014; 22.2 
46.20 	percent of the sum of items (i) to (viii) for October 1, 2016;
46.21 	(i) for all compensated hours from $8 to $8.49 per hour, the number of compensated 
46.22 	hours is multiplied by $0.13;
46.23 	(ii) for all compensated hours from $8.50 to $8.99 per hour, the number of 
46.24 	compensated hours is multiplied by $0.25;
46.25 	(iii) for all compensated hours from $9 to $9.49 per hour, the number of compensated 
46.26 	hours is multiplied by $0.38;
46.27 	(iv) for all compensated hours from $9.50 to $10.49 per hour, the number of 
46.28 	compensated hours is multiplied by $0.50;
46.29 	(v) for all compensated hours from $10.50 to $10.99 per hour, the number of 
46.30 	compensated hours is multiplied by $0.40;
46.31 	(vi) for all compensated hours from $11 to $11.49 per hour, the number of 
46.32 	compensated hours is multiplied by $0.30;
46.33 	(vii) for all compensated hours from $11.50 to $11.99 per hour, the number of 
46.34 	compensated hours is multiplied by $0.20; and
46.35 	(viii) for all compensated hours from $12 to $13 per hour, the number of 
46.36 	compensated hours is multiplied by $0.10; and
47.1 	(3) the sum of the employer's share of FICA taxes, Medicare taxes, state and federal 
47.2 	unemployment taxes, workers' compensation, pensions, and contributions to employee 
47.3 	retirement accounts attributable to the amounts in clauses (1) and (2).

47.4 	Sec. 37. [256R.50] BED RELOCATIONS.
47.5 		Subdivision 1.Method for determining budget-neutral nursing facility rates for 
47.6 	relocated beds. Nursing facility rates for bed relocations must be calculated by comparing 
47.7 	the estimated medical assistance costs prior to and after the proposed bed relocation 
47.8 	using the calculations in this section. All payment rates are based on a case mix index 
47.9 	of 1.0, with other case mix adjusted rates determined accordingly. Nursing facility beds 
47.10 	on layaway status that are being moved must be included in the calculation for both the 
47.11 	originating and receiving facility and treated as though they were in active status with the 
47.12 	occupancy characteristics of the active beds of the originating facility.
47.13 		Subd. 2.Determination of costs in originating facility. Medical assistance costs 
47.14 	of the beds in the originating nursing facilities must be calculated as follows:
47.15 	(1) multiply each originating facility's total payment rate for a case mix index of 1.0 by 
47.16 	the facility's percentage of medical assistance days on its most recent available cost report;
47.17 	(2) take the products in clause (1) and multiply by each facility's average case mix 
47.18 	index for medical assistance residents on its most recent available cost report;
47.19 	(3) take the products in clause (2) and multiply by the number of beds being 
47.20 	relocated, times 365; and
47.21 	(4) calculate the sum of the amounts determined in clause (3).
47.22 		Subd. 3.Determination of costs in receiving facility. Medical assistance costs in 
47.23 	the receiving facility, prior to the bed relocation, must be calculated as follows:
47.24 	(1) multiply the facility's total payment rate for a case mix index of 1.0 by the 
47.25 	medical assistance days on the most recent cost report; and
47.26 	(2) multiply the product in clause (1) by the facility average case mix index of 
47.27 	medical assistance residents on the most recent cost report.
47.28 		Subd. 4.Determination of costs prior to relocation. The commissioner shall 
47.29 	determine the medical assistance costs prior to the bed relocation which must be the sum 
47.30 	of the amounts determined in subdivisions 2 and 3.
47.31 		Subd. 5.Estimation of costs after bed relocation. The commissioner shall 
47.32 	estimate the medical assistance costs after the bed relocation as follows:
47.33 	(1) estimate the medical assistance days in the receiving facility after the bed 
47.34 	relocation. The commissioner may use the current medical assistance portion, or if data 
48.1 	does not exist, may use the statewide average, or may use the provider's estimate of the 
48.2 	medical assistance utilization of the relocated beds;
48.3 	(2) estimate the receiving facility's average case mix index of medical assistance 
48.4 	residents after the bed relocation. The commissioner may use current facility average case 
48.5 	mix index or, if data does not exist, may use the statewide average case mix index, or may 
48.6 	use the provider's estimate of the facility average case mix index; and
48.7 	(3) multiply the amount determined in clause (1) by the amount determined in 
48.8 	clause (2) by the total payment rate for a case mix index of 1.0 that is the highest rate of 
48.9 	the facilities from which the relocated beds either originate or to which they are being 
48.10 	relocated so long as that rate is associated with ten percent or more of the total number of 
48.11 	beds to be in the receiving facility after the bed relocation.
48.12 		Subd. 6.Determination of rate adjustment. (a) If the amount determined in 
48.13 	subdivision 5 is less than or equal to the amount determined in subdivision 4, the 
48.14 	commissioner shall allow a total payment rate equal to the amount used in subdivision 
48.15 	5, clause (3).
48.16 	(b) If the amount determined in subdivision 5 is greater than the amount determined 
48.17 	in subdivision 4, the commissioner shall allow a rate with a case mix index of 1.0 that 
48.18 	when used in subdivision 5, clause (3), results in the amount determined in subdivision 5 
48.19 	being equal to the amount determined in subdivision 4.
48.20 	(c) If the commissioner relies upon provider estimates in subdivision 5, clause (1) or 
48.21 	(2), then annually, for three years after the rates determined in this section take effect, the 
48.22 	commissioner shall determine the accuracy of the alternative factors of medical assistance 
48.23 	case load and the facility average case mix index used in this section and shall reduce the 
48.24 	total payment rate if the factors used result in medical assistance costs exceeding the 
48.25 	amount in subdivision 4. If the actual medical assistance costs exceed the estimates by 
48.26 	more than five percent, the commissioner shall also recover the difference between the 
48.27 	estimated costs in subdivision 5 and the actual costs according to section 256B.0641. 
48.28 	The commissioner may require submission of data from the receiving facility needed to 
48.29 	implement this paragraph.
48.30 	(d) When beds approved for relocation are put into active service at the destination 
48.31 	facility, rates determined in this section must be adjusted by any adjustment amounts that 
48.32 	were implemented after the date of the letter of approval.

48.33 	Sec. 38. [256R.51] ADJUSTMENT FOR SPECIAL DIETARY NEEDS.
48.34 	(a) The commissioner shall adjust the rates of a nursing facility that meets the 
48.35 	criteria for the special dietary needs of its residents and the requirements in section 
49.1 	31.651 or 31.658. The adjustment for raw food cost shall be the difference between the 
49.2 	nursing facility's most recently reported allowable raw food cost per resident day and 115 
49.3 	percent of the median allowable raw food cost per resident day. This amount shall be 
49.4 	removed from other care-related costs per resident day as determined in section 256R.23, 
49.5 	subdivision 3, and included in the external fixed costs payment rate under section 256R.25.
49.6 	(b) In calculating a nursing facility's other care-related costs per day for the purposes 
49.7 	of comparing to an array, a median, or other statistical measure of nursing facility payment 
49.8 	rates used to determine future rate adjustments under this chapter, the commissioner shall 
49.9 	exclude adjustments for raw food costs under this section.

49.10 	Sec. 39. [256R.52] NURSING FACILITY RECEIVERSHIP FEES.
49.11 		Subdivision 1.Payment of receivership fees. (a) When the commissioner of 
49.12 	health notifies the commissioner of human services that a nursing facility is subject to 
49.13 	the receivership provisions under section 144A.15 and provides a recommendation 
49.14 	in accordance with section 144A.154, the commissioner in consultation with the 
49.15 	commissioner of health may establish a receivership fee that is added to a nursing facility 
49.16 	payment. The commissioner shall reduce the requested amount by any amounts the 
49.17 	commissioner determines are included in the nursing facility's payment rate and that are 
49.18 	not specifically required to be paid for expenditures of the nursing facility.
49.19 	A receivership fee shall be set according to paragraphs (b) and (c) and payment 
49.20 	shall be according to paragraphs (d) to (f).
49.21 	(b) The receivership fee per day shall be determined and revised as necessary by 
49.22 	dividing the estimated amount of needed additional funding or actual additional costs of the 
49.23 	receivership by the estimated resident days for the projected duration of the receivership.
49.24 	(c) The receivership fee per day shall be added to the nursing facility's payment rate.
49.25 	(d) Notification of the payment rate increase must meet the requirements of section 
49.26 	256R.06, subdivisions 5.
49.27 	(e) The payment rate in paragraph (c) for a nursing facility is effective the first 
49.28 	day of the receivership.
49.29 	(f) The commissioner may elect to make a lump-sum payment of a portion of the 
49.30 	receivership fee to the receiver or managing agent. In this case, the commissioner and 
49.31 	the receiver or managing agent shall agree to a repayment plan. Regardless of whether 
49.32 	the commissioner makes a lump-sum payment under this paragraph, the provisions of 
49.33 	paragraphs (b) to (e) apply.
49.34 		Subd. 2.Sale or transfer of a nursing facility in receivership after closure. (a) 
49.35 	Upon the subsequent sale or transfer of a nursing facility in receivership, the commissioner 
50.1 	shall seek to recover from the prior licensee any amounts paid through payment rate 
50.2 	adjustments under subdivision 1. The prior licensee shall repay this amount to the 
50.3 	commissioner within 60 days after the commissioner notifies the prior licensee of the 
50.4 	obligation to repay.
50.5 	(b) The commissioner may recover amounts paid through the receivership fee by 
50.6 	means of withholding from the prior licensee payments related to any other medical 
50.7 	assistance provider of the prior licensee in Minnesota. The prior licensee must also repay 
50.8 	private-pay residents the amount the private-pay resident paid for the receivership fee. 
50.9 	(c) If a nursing facility with payment rates determined under subdivision 1 is later 
50.10 	sold while the nursing facility is in receivership, the payment rates in effect prior to the 
50.11 	receivership shall be the new owner's payment rates. The commissioner shall apply to 
50.12 	these rates any rate adjustment provided to other nursing facilities for which the facility is 
50.13 	qualified.
50.14 	(d) The commissioner may adjust, reclassify, or disallow costs reported for a facility 
50.15 	that was in receivership for periods of a reporting period during which the receivership 
50.16 	was in effect and for the prior year.

50.17 	Sec. 40. [256R.53] FACILITY SPECIFIC EXEMPTIONS.
50.18 		Subdivision 1.Nursing facility in Golden Valley. The operating payment rate for a 
50.19 	facility located in the city of Golden Valley at 3915 Golden Valley Road with 44 licensed 
50.20 	rehabilitation beds as of January 7, 2015, is the sum of its direct care costs per standardized 
50.21 	day, its other care-related costs per resident day, and its other operating costs per day.
50.22 		Subd. 2.Nursing facility in Breckenridge. The operating payment rate of a 
50.23 	nonprofit nursing facility that exists on January 1, 2015, is located within the boundaries 
50.24 	of the city of Breckenridge, and is reimbursed under this chapter, is equal to the greater of:
50.25 	(1) the operating payment rate determined under section 256R.21, subdivision 3; or
50.26 	(2) the median case mix adjusted rates, including comparable rate components as 
50.27 	determined by the median case mix adjusted rates, including comparable rate components 
50.28 	as determined by the commissioner, for the equivalent case mix indices of the nonprofit 
50.29 	nursing facility or facilities located in an adjacent city in another state and in cities 
50.30 	contiguous to the adjacent city. The Minnesota facility's operating payment rate with 
50.31 	a case mix index of 1.0 is computed by dividing the adjacent city's nursing facility or 
50.32 	facilities' median operating payment rate with an index of 1.02 by 1.02.
50.33 	PAYMENTS FOR SERVICES BILLED SEPARATELY

50.34 	Sec. 41. [256R.54] ANCILLARY SERVICES.
51.1 		Subdivision 1.Setting payment; monitoring use of therapy services. (a) The 
51.2 	commissioner shall adopt rules under the Administrative Procedure Act to set the amount 
51.3 	and method of payment for ancillary materials and services provided to recipients residing 
51.4 	in nursing facilities. Payment for materials and services may be made to either the vendor 
51.5 	of ancillary services pursuant to Minnesota Rules, parts 9505.0170 to 9505.0475, or to a 
51.6 	nursing facility pursuant to Minnesota Rules, parts 9505.0170 to 9505.0475.
51.7 	(b) Payment for the same or similar service to a recipient shall not be made to both 
51.8 	the nursing facility and the vendor. The commissioner shall ensure: (1) the avoidance of 
51.9 	double payments through audits and adjustments to the nursing facility's annual cost 
51.10 	report as required by section 256R.12, subdivisions 8 and 9; and (2) that charges and 
51.11 	arrangements for ancillary materials and services are cost-effective and as would be 
51.12 	incurred by a prudent and cost-conscious buyer.
51.13 	(c) Therapy services provided to a recipient must be medically necessary and 
51.14 	appropriate to the medical condition of the recipient. If the vendor, nursing facility, or 
51.15 	ordering physician cannot provide adequate medical necessity justification, as determined 
51.16 	by the commissioner, the commissioner may recover or disallow the payment for the 
51.17 	services and may require prior authorization for therapy services as a condition of payment 
51.18 	or may impose administrative sanctions to limit the vendor, nursing facility, or ordering 
51.19 	physician's participation in the medical assistance program. If the provider number of a 
51.20 	nursing facility is used to bill services provided by a vendor of therapy services that is 
51.21 	not related to the nursing facility by ownership, control, affiliation, or employment status, 
51.22 	no withholding of payment shall be imposed against the nursing facility for services not 
51.23 	medically necessary except for funds due the unrelated vendor of therapy services as 
51.24 	provided in subdivision 5. For the purpose of this subdivision, no monetary recovery may 
51.25 	be imposed against the nursing facility for funds paid to the unrelated vendor of therapy 
51.26 	services as provided in subdivision 5, for services not medically necessary. 
51.27 	(d) For purposes of this section and section 256R.12, subdivisions 8 and 9, therapy 
51.28 	includes physical therapy, occupational therapy, speech therapy, audiology, and mental 
51.29 	health services that are covered services according to Minnesota Rules, parts 9505.0170 
51.30 	to 9505.0475.
51.31 	(e) For purposes of this subdivision, "ancillary services" includes transportation 
51.32 	defined as a covered service in section 256B.0625, subdivision 17.
51.33 		Subd. 2.Certification that treatment is appropriate. The physical therapist, 
51.34 	occupational therapist, speech therapist, mental health professional, or audiologist who 
51.35 	provides or supervises the provision of therapy services, other than an initial evaluation, 
51.36 	to a medical assistance recipient must certify in writing that the therapy's nature, scope, 
52.1 	duration, and intensity are appropriate to the medical condition of the recipient every 
52.2 	30 days. The therapist's statement of certification must be maintained in the recipient's 
52.3 	medical record together with the specific orders by the physician and the treatment plan. If 
52.4 	the recipient's medical record does not include these documents, the commissioner may 
52.5 	recover or disallow the payment for such services. If the therapist determines that the 
52.6 	therapy's nature, scope, duration, or intensity is not appropriate to the medical condition of 
52.7 	the recipient, the therapist must provide a statement to that effect in writing to the nursing 
52.8 	facility for inclusion in the recipient's medical record. The commissioner shall make 
52.9 	recommendations regarding the medical necessity of services provided.
52.10 		Subd. 3.Separate billings for therapy services; nursing facility provider number.
 52.11 	Payment for therapy services provided to nursing facility residents that are billed separate 
52.12 	from nursing facility's payment rate or according to Minnesota Rules, parts 9505.0170 to 
52.13 	9505.0475, shall be subject to the requirements in this subdivision and subdivisions 4 to 8.
52.14 	The practitioner invoice must include, in a format specified by the commissioner, 
52.15 	the provider number of the nursing facility where the medical assistance recipient resides 
52.16 	regardless of the service setting.
52.17 		Subd. 4.Separate billings for therapy services; related vendors. Nursing 
52.18 	facilities that are related by ownership, control, affiliation, or employment status to the 
52.19 	vendor of therapy services shall report, in a format specified by the commissioner, the 
52.20 	revenues received during the reporting period for therapy services provided to residents 
52.21 	of the nursing facility. The commissioner shall offset the revenues received during the 
52.22 	reporting period for therapy services provided to residents of the nursing facility to the 
52.23 	total payment rate of the nursing facility by dividing the amount of offset by the sum of 
52.24 	the nursing facility's resident days. Except as specified in subdivisions 6 and 8, the amount 
52.25 	of offset shall be the revenue in excess of 108 percent of the cost removed from the cost 
52.26 	report resulting from the requirement of the commissioner to ensure the avoidance of 
52.27 	double payments as determined by section 256R.12, subdivisions 8 and 9.
52.28 		Subd. 5.Separate billings for therapy services; unrelated vendors. Nursing 
52.29 	facilities shall limit charges in total to vendors of therapy services for renting space, 
52.30 	equipment, or obtaining other services during the rate year to 108 percent of the annualized 
52.31 	cost removed from the reporting period cost report resulting from the requirement of the 
52.32 	commissioner to ensure the avoidance of double payments as determined by section 
52.33 	256R.12, subdivisions 8 and 9. If the arrangement for therapy services is changed so that a 
52.34 	nursing facility is subject to this subdivision instead of subdivision 4, the cost that is used 
52.35 	to determine rent must be adjusted to exclude the annualized costs for therapy services 
52.36 	that are not provided in the rate year. The maximum charges to the vendors shall be 
53.1 	based on the commissioner's determination of annualized cost and may be subsequently 
53.2 	adjusted upon resolution of appeals.
53.3 		Subd. 6.Separate billings for therapy services; cost to revenue ratio. The 
53.4 	commissioner shall require reporting of all revenues relating to the provision of therapy 
53.5 	services and shall establish a therapy cost, as determined by section 256R.12, subdivisions 
53.6 	8 and 9, to revenue ratio for the reporting period ending in 1986. For subsequent reporting 
53.7 	periods the ratio may increase five percentage points in total until a new base year is 
53.8 	established under subdivision 7. Increases in excess of five percentage points may be 
53.9 	allowed if adequate justification is provided to and accepted by the commissioner. Unless 
53.10 	an exception is allowed by the commissioner, the amount of offset in subdivision 4 is 
53.11 	the greater of the amount determined in subdivision 4 or the amount of offset that is 
53.12 	imputed based on one minus the lesser of (1) the actual reporting period ratio or (2) the 
53.13 	base reporting period ratio increased by five percentage points, multiplied by the revenues.
53.14 		Subd. 7.Separate billings for therapy services; base year. The commissioner 
53.15 	may establish a new base reporting period for determining the cost to revenue ratio.
53.16 		Subd. 8.Separate billings for therapy services; transition from unrelated to 
53.17 	related vendor. If the arrangement for therapy services is changed so that a nursing 
53.18 	facility is subject to the provisions of subdivision 4 instead of subdivision 5, an average 
53.19 	cost to revenue ratio based on the ratios of nursing facilities that are subject to the 
53.20 	provisions of subdivision 4 shall be imputed for subdivision 6.
53.21 		Subd. 9.Separate billings for therapy services; prohibited practices. This 
53.22 	section does not allow unrelated nursing facilities to reorganize related organization 
53.23 	therapy services and provide services among themselves to avoid offsetting revenues. 
53.24 	Nursing facilities that are found to be in violation of this provision are subject to the 
53.25 	penalty requirements of section 256R.04, subdivision 5.

53.26 	EFFECTIVE DATE. The grant of rulemaking authority to the commissioner 
53.27 	of human services in this section is a continuation of authority previously granted in 
53.28 	Minnesota Statutes, section 256B.433, subdivision 1.

53.29 	Sec. 42. REVISOR'S INSTRUCTION.
 53.30 	The revisor of statutes shall make necessary cross-reference changes and remove 
53.31 	statutory cross-references in Minnesota Statutes and Minnesota Rules to conform with the 
53.32 	recodification and repealer in this act. The revisor may make technical and other necessary 
53.33 	changes to sentence structure to preserve the meaning of the text. The revisor may alter 
53.34 	the statutory coding in this act to incorporate statutory changes made by other law in the 
53.35 	2016 regular legislative session. If a provision repealed in this act is also amended in the 
54.1 	2016 regular legislative session by other law, the revisor shall merge the amendment into 
54.2 	the recodification, notwithstanding Minnesota Statutes, section 645.30.

54.3 	Sec. 43. REPEALER.
 54.4 	(a) Minnesota Statutes 2014, sections 256B.0911, subdivision 7; 256B.25, 
54.5 	subdivision 4; 256B.27, subdivision 2a; 256B.41, subdivisions 1, 2, and 3; 256B.411, 
54.6 	subdivisions 1 and 2; 256B.421, subdivisions 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, and 
54.7 	15; 256B.431, subdivisions 1, 2d, 2e, 2n, 2r, 2s, 2t, 3e, 32, 35, 42, and 44; 256B.432, 
54.8 	subdivisions 1, 2, 3, 4, 4a, 5, 6, 6a, 7, and 8; 256B.433, subdivisions 1, 2, 3, and 3a; 
54.9 	256B.434, subdivisions 2, 9, 11, 12, 14, 15, 16, 18, 19a, 20, and 21; 256B.437, subdivisions 
54.10 	1, 3, 4, 5, 6, 7, 9, and 10; 256B.438, subdivisions 1, 2, 3, 4, 5, 6, 7, and 8; 256B.441, 
54.11 	subdivisions 2, 3, 4, 7, 8, 9, 10, 11, 15, 18, 20, 22, 23, 24, 25, 27, 28a, 29, 32, 33a, 34, 36, 
54.12 	37, 38, 39, 41, 42a, 43, 46b, 47, 49, 57, 59, 60, 61, and 64; 256B.47, subdivisions 1, 2, 3, 
54.13 	and 4; and 256B.48, subdivisions 1, 1a, 1b, 1c, 3, 4, 5, 6a, 7, and 8, are repealed.
54.14 	(b) Minnesota Statutes 2015 Supplement, sections 256B.431, subdivisions 2b and 
54.15 	36; 256B.441, subdivisions 1, 5, 6, 11a, 13, 14, 17, 30, 31, 33, 35, 40, 44, 46c, 46d, 
54.16 	48, 50, 51, 51a, 51b, 53, 54, 55a, 56, 63, 65, 66, and 67; and 256B.495, subdivisions 1 
54.17 	and 5, are repealed.
54.18 	(c) Minnesota Rules, parts 9549.0035, subparts 1, 3, 7, and 8; 9549.0041, subpart 6; 
54.19 	9549.0055, subparts 1, 2, and 3; and 9549.0070, subparts 2 and 3, are repealed.

54.20 	ARTICLE 2
54.21 	CONFORMING CHANGES

54.22 	Section 1. Minnesota Statutes 2014, section 144A.071, subdivision 2, is amended to 
54.23 	read:
54.24 		Subd. 2.Moratorium. The commissioner of health, in coordination with the 
54.25 	commissioner of human services, shall deny each request for new licensed or certified 
54.26 	nursing home or certified boarding care beds except as provided in subdivision 3 or 4a, 
54.27 	or section 144A.073. "Certified bed" means a nursing home bed or a boarding care bed 
54.28 	certified by the commissioner of health for the purposes of the medical assistance program, 
54.29 	under United States Code, title 42, sections 1396 et seq. Certified beds in facilities which 
54.30 	do not allow medical assistance intake shall be deemed to be decertified for purposes 
54.31 	of this section only. [256B.48, subd. 1, third unlettered paragraph after paragraph (g), 
54.32 	with an old date removed]
54.33 	The commissioner of human services, in coordination with the commissioner of 
54.34 	health, shall deny any request to issue a license under section 252.28 and chapter 245A to 
55.1 	a nursing home or boarding care home, if that license would result in an increase in the 
55.2 	medical assistance reimbursement amount.
55.3 	In addition, the commissioner of health must not approve any construction project 
55.4 	whose cost exceeds $1,000,000, unless:
55.5 	(a) any construction costs exceeding $1,000,000 are not added to the facility's 
55.6 	appraised value and are not included in the facility's payment rate for reimbursement 
55.7 	under the medical assistance program; or
55.8 	(b) the project:
55.9 	(1) has been approved through the process described in section 144A.073;
55.10 	(2) meets an exception in subdivision 3 or 4a;
55.11 	(3) is necessary to correct violations of state or federal law issued by the 
55.12 	commissioner of health;
55.13 	(4) is necessary to repair or replace a portion of the facility that was damaged by fire, 
55.14 	lightning, ground shifts, or other such hazards, including environmental hazards, provided 
55.15 	that the provisions of subdivision 4a, clause (a), are met;
55.16 	(5) as of May 1, 1992, the facility has submitted to the commissioner of health 
55.17 	written documentation evidencing that the facility meets the "commenced construction" 
55.18 	definition as specified in subdivision 1a, clause (d), or that substantial steps have been 
55.19 	taken prior to April 1, 1992, relating to the construction project. "Substantial steps" 
55.20 	require that the facility has made arrangements with outside parties relating to the 
55.21 	construction project and include the hiring of an architect or construction firm, submission 
55.22 	of preliminary plans to the Department of Health or documentation from a financial 
55.23 	institution that financing arrangements for the construction project have been made; or
55.24 	(6) is being proposed by a licensed nursing facility that is not certified to participate 
55.25 	in the medical assistance program and will not result in new licensed or certified beds.
55.26 	Prior to the final plan approval of any construction project, the commissioner of 
55.27 	health shall be provided with an itemized cost estimate for the project construction costs. 
55.28 	If a construction project is anticipated to be completed in phases, the total estimated cost of 
55.29 	all phases of the project shall be submitted to the commissioner and shall be considered as 
55.30 	one construction project. Once the construction project is completed and prior to the final 
55.31 	clearance by the commissioner, the total project construction costs for the construction 
55.32 	project shall be submitted to the commissioner. If the final project construction cost 
55.33 	exceeds the dollar threshold in this subdivision, the commissioner of human services shall 
55.34 	not recognize any of the project construction costs or the related financing costs in excess 
55.35 	of this threshold in establishing the facility's property-related payment rate.
56.1 	The dollar thresholds for construction projects are as follows: for construction 
56.2 	projects other than those authorized in clauses (1) to (6), the dollar threshold is $1,000,000. 
56.3 	For projects authorized after July 1, 1993, under clause (1), the dollar threshold is the cost 
56.4 	estimate submitted with a proposal for an exception under section 144A.073, plus inflation 
56.5 	as calculated according to section 256B.431, subdivision 3f, paragraph (a). For projects 
56.6 	authorized under clauses (2) to (4), the dollar threshold is the itemized estimate project 
56.7 	construction costs submitted to the commissioner of health at the time of final plan approval, 
56.8 	plus inflation as calculated according to section 256B.431, subdivision 3f, paragraph (a).
56.9 	The commissioner of health shall adopt rules to implement this section or to amend 
56.10 	the emergency rules for granting exceptions to the moratorium on nursing homes under 
56.11 	section 144A.073.

56.12 	Sec. 2. Minnesota Statutes 2015 Supplement, section 144A.15, subdivision 6, is 
56.13 	amended to read:
56.14 		Subd. 6.Postreceivership period; facility remaining open. (a) If a facility remains 
56.15 	open after the receivership is concluded, a new operator is only legally responsible under 
56.16 	state law for its actions after the receivership has concluded.
56.17 	(b) The commissioner of human services may adjust, reclassify, or disallow costs 
56.18 	reported for a facility that was in receivership for periods of a reporting year during which 
56.19 	the receivership was in effect and for the prior year.

56.20 	Sec. 3. Minnesota Statutes 2014, section 256B.0625, is amended by adding a 
56.21 	subdivision to read:
56.22 		Subd. 57a.Payment limitation for Medicare-covered skilled nursing facility 
56.23 	stays. For services rendered on or after July 1, 2003, for facilities reimbursed under 
56.24 	this chapter or chapter 256R, the Medicaid program shall only pay a co-payment during 
56.25 	a Medicare-covered skilled nursing facility stay if the Medicare rate less the resident's 
56.26 	co-payment responsibility is less than the case mix adjusted total payment rate under 
56.27 	chapter 256R. The amount that shall be paid by the Medicaid program is equal to the 
56.28 	amount by which the case mix adjusted total payment rate exceeds the Medicare rate less 
56.29 	the co-payment responsibility. Health plans paying for nursing home services under 
56.30 	section 256B.69, subdivision 6a, may limit payments as allowed under this subdivision.

56.31 	Sec. 4. Minnesota Statutes 2014, section 256B.19, subdivision 1e, is amended to read:
56.32 		Subd. 1e.Additional local share of certain nursing facility costs. Beginning 
56.33 	October 1, 2011, Participating local governmental entities that own the physical plant or are 
57.1 	the license holders of nursing facilities receiving rate adjustments under section 256B.441, 
57.2 	subdivision 55a 256R.48, shall be responsible for paying the portion of nonfederal costs 
57.3 	calculated under section 256B.441, subdivision 55a, paragraph (e) 256R.48, paragraph 
57.4 	(d). Payments of the nonfederal share shall be submitted to the commissioner by the 15th 
57.5 	day of the month prior to payment to the nursing facility for that month's services. If any 
57.6 	participating governmental entity obligated to pay an amount under this subdivision does 
57.7 	not make timely payment of the monthly installment, the commissioner shall revoke 
57.8 	participation under this subdivision and end payments determined under section 256B.441, 
57.9 	subdivision 55a 256R.48, to the participating nursing facility effective on the first day of 
57.10 	the month for which timely payment was not received. In the event of revocation, the 
57.11 	nursing facility may not bill, collect, or retain the amount allowed in section 256B.441, 
57.12 	subdivision 55a 256R.48, from private-pay residents for days of service on or after the 
57.13 	first day of the month following the month in which the revocation occurred.

57.14 	Sec. 5. Minnesota Statutes 2014, section 256B.431, subdivision 22, is amended to read:
57.15 		Subd. 22.Changes to nursing facility reimbursement. The nursing facility 
57.16 	reimbursement changes in paragraphs (a) to (d) apply to Minnesota Rules, parts 9549.0010 
57.17 	to 9549.0080, and this section, and are effective for rate years beginning on or after July 1, 
57.18 	1993, unless otherwise indicated.
57.19 	(a) In addition to the approved pension or profit-sharing plans allowed by the 
57.20 	reimbursement rule, the commissioner shall allow those plans specified in Internal 
57.21 	Revenue Code, sections 403(b) and 408(k).
57.22 	(b) The commissioner shall allow as workers' compensation insurance costs under 
57.23 	section 256B.421, subdivision 14, the costs of workers' compensation coverage obtained 
57.24 	under the following conditions:
57.25 	(1) a plan approved by the commissioner of commerce as a Minnesota group or 
57.26 	individual self-insurance plan as provided in section 79A.03;
57.27 	(2) a plan in which:
57.28 	(i) the nursing facility, directly or indirectly, purchases workers' compensation 
57.29 	coverage in compliance with section 176.181, subdivision 2, from an authorized insurance 
57.30 	carrier;
57.31 	(ii) a related organization to the nursing facility reinsures the workers' compensation 
57.32 	coverage purchased, directly or indirectly, by the nursing facility; and
57.33 	(iii) all of the conditions in clause (4) are met;
57.34 	(3) a plan in which:
58.1 	(i) the nursing facility, directly or indirectly, purchases workers' compensation 
58.2 	coverage in compliance with section 176.181, subdivision 2, from an authorized insurance 
58.3 	carrier;
58.4 	(ii) the insurance premium is calculated retrospectively, including a maximum 
58.5 	premium limit, and paid using the paid loss retro method; and
58.6 	(iii) all of the conditions in clause (4) are met;
58.7 	(4) additional conditions are:
58.8 	(i) the costs of the plan are allowable under the federal Medicare program;
58.9 	(ii) the reserves for the plan are maintained in an account controlled and administered 
58.10 	by a person which is not a related organization to the nursing facility;
58.11 	(iii) the reserves for the plan cannot be used, directly or indirectly, as collateral 
58.12 	for debts incurred or other obligations of the nursing facility or related organizations to 
58.13 	the nursing facility;
58.14 	(iv) if the plan provides workers' compensation coverage for non-Minnesota nursing 
58.15 	facilities, the plan's cost methodology must be consistent among all nursing facilities 
58.16 	covered by the plan, and if reasonable, is allowed notwithstanding any reimbursement 
58.17 	laws regarding cost allocation to the contrary;
58.18 	(v) central, affiliated, corporate, or nursing facility costs related to their 
58.19 	administration of the plan are costs which must remain in the nursing facility's 
58.20 	administrative cost category and must not be allocated to other cost categories;
58.21 	(vi) required security deposits, whether in the form of cash, investments, securities, 
58.22 	assets, letters of credit, or in any other form are not allowable costs for purposes of 
58.23 	establishing the facilities payment rate; and
58.24 	(vii) for the rate year beginning on July 1, 1998, a group of nursing facilities related 
58.25 	by common ownership that self-insures workers' compensation may allocate its directly 
58.26 	identified costs of self-insuring its Minnesota nursing facility workers among those 
58.27 	nursing facilities in the group that are reimbursed under this section or section 256B.434. 
58.28 	The method of cost allocation shall be based on the ratio of each nursing facility's 
58.29 	total allowable salaries and wages to that of the nursing facility group's total allowable 
58.30 	salaries and wages, then similarly allocated within each nursing facility's operating cost 
58.31 	categories. The costs associated with the administration of the group's self-insurance plan 
58.32 	must remain classified in the nursing facility's administrative cost category. A written 
58.33 	request of the nursing facility group's election to use this alternate method of allocation of 
58.34 	self-insurance costs must be received by the commissioner no later than May 1, 1998, to 
58.35 	take effect July 1, 1998, or such costs shall continue to be allocated under the existing cost 
58.36 	allocation methods. Once a nursing facility group elects this method of cost allocation for 
59.1 	its workers' compensation self-insurance costs, it shall remain in effect until such time as 
59.2 	the group no longer self-insures these costs;
59.3 	(5) any costs allowed pursuant to clauses (1) to (3) are subject to the following 
59.4 	requirements:
59.5 	(i) if the nursing facility is sold or otherwise ceases operations, the plan's reserves 
59.6 	must be subject to an actuarially based settle up after 36 months from the date of sale or 
59.7 	the date on which operations ceased. The facility's medical assistance portion of the 
59.8 	total excess plan reserves must be paid to the state within 30 days following the date on 
59.9 	which excess plan reserves are determined;
59.10 	(ii) any distribution of excess plan reserves made to or withdrawals made by the 
59.11 	nursing facility or a related organization are applicable credits and must be used to reduce 
59.12 	the nursing facility's workers' compensation insurance costs in the reporting period in 
59.13 	which a distribution or withdrawal is received;
59.14 	(iii) if reimbursement for the plan is sought under the federal Medicare program, 
59.15 	and is audited pursuant to the Medicare program, the nursing facility must provide a copy 
59.16 	of Medicare's final audit report, including attachments and exhibits, to the commissioner 
59.17 	within 30 days of receipt by the nursing facility or any related organization. The 
59.18 	commissioner shall implement the audit findings associated with the plan upon receipt of 
59.19 	Medicare's final audit report. The department's authority to implement the audit findings is 
59.20 	independent of its authority to conduct a field audit.
59.21 	(c) In the determination of incremental increases in the nursing facility's rental rate 
59.22 	as required in subdivisions 14 to 21, except for a refinancing permitted under subdivision 
59.23 	19, the commissioner must adjust the nursing facility's property-related payment rate for 
59.24 	both incremental increases and decreases in recomputations of its rental rate;.
59.25 	(d) A nursing facility's administrative cost limitation must be modified as follows:
59.26 	(1) if the nursing facility's licensed beds exceed 195 licensed beds, the general and 
59.27 	administrative cost category limitation shall be 13 percent;
59.28 	(2) if the nursing facility's licensed beds are more than 150 licensed beds, but less 
59.29 	than 196 licensed beds, the general and administrative cost category limitation shall be 
59.30 	14 percent; or
59.31 	(3) if the nursing facility's licensed beds is less than 151 licensed beds, the general 
59.32 	and administrative cost category limitation shall remain at 15 percent.
59.33 	(e) For the rate year beginning on July 1, 1998, a group of nursing facilities related by 
59.34 	common ownership that self-insures group health, dental, or life insurance may allocate its 
59.35 	directly identified costs of self-insuring its Minnesota nursing facility workers among those 
59.36 	nursing facilities in the group that are reimbursed under this section or section 256B.434. 
60.1 	The method of cost allocation shall be based on the ratio of each nursing facility's total 
60.2 	allowable salaries and wages to that of the nursing facility group's total allowable salaries 
60.3 	and wages, then similarly allocated within each nursing facility's operating cost categories. 
60.4 	The costs associated with the administration of the group's self-insurance plan must remain 
60.5 	classified in the nursing facility's administrative cost category. A written request of the 
60.6 	nursing facility group's election to use this alternate method of allocation of self-insurance 
60.7 	costs must be received by the commissioner no later than May 1, 1998, to take effect July 
60.8 	1, 1998, or those self-insurance costs shall continue to be allocated under the existing cost 
60.9 	allocation methods. Once a nursing facility group elects this method of cost allocation for 
60.10 	its group health, dental, or life insurance self-insurance costs, it shall remain in effect until 
60.11 	such time as the group no longer self-insures these costs.

60.12 	Sec. 6. Minnesota Statutes 2014, section 256B.434, subdivision 10, is amended to read:
60.13 		Subd. 10.Exemptions. (a) To the extent permitted by federal law, (1) a facility that 
60.14 	has entered into a contract under this section is not required to file a cost report, as defined 
60.15 	in Minnesota Rules, part 9549.0020, subpart 13, for any year after the base year that is the 
60.16 	basis for the calculation of the contract payment rate for the first rate year of the alternative 
60.17 	payment demonstration project contract; and (2) a facility under contract is not subject 
60.18 	to audits of historical costs or revenues, or paybacks or retroactive adjustments based on 
60.19 	these costs or revenues, except audits, paybacks, or adjustments relating to the cost report 
60.20 	that is the basis for calculation of the first rate year under the contract.
60.21 	(b) A facility that is under contract with the commissioner under this section is 
60.22 	not subject to the moratorium on licensure or certification of new nursing home beds in 
60.23 	section 144A.071, unless the project results in a net increase in bed capacity or involves 
60.24 	relocation of beds from one site to another. Contract payment rates must not be adjusted 
60.25 	to reflect any additional costs that a nursing facility incurs as a result of a construction 
60.26 	project undertaken under this paragraph subdivision. In addition, as a condition of 
60.27 	entering into a contract under this section, a nursing facility must agree that any future 
60.28 	medical assistance payments for nursing facility services will not reflect any additional 
60.29 	costs attributable to the sale of a nursing facility under this section and to construction 
60.30 	undertaken under this paragraph subdivision that otherwise would not be authorized 
60.31 	under the moratorium in section 144A.073. Nothing in this section prevents a nursing 
60.32 	facility participating in the alternative payment demonstration project under this section 
60.33 	from seeking approval of an exception to the moratorium through the process established 
60.34 	in section 144A.073, and if approved the facility's rates shall be adjusted to reflect the 
60.35 	cost of the project. Nothing in this section prevents a nursing facility participating in 
61.1 	the alternative payment demonstration project from seeking legislative approval of an 
61.2 	exception to the moratorium under section 144A.071, and, if enacted, the facility's rates 
61.3 	shall be adjusted to reflect the cost of the project.
61.4 	(c) Notwithstanding paragraph (a), if by April 1, 1996, the health care financing 
61.5 	administration has not approved a required waiver, or the Centers for Medicare and 
61.6 	Medicaid Services otherwise requires cost reports to be filed prior to the waiver's approval, 
61.7 	the commissioner shall require a cost report for the rate year.
61.8 	(d) A facility that is under contract with the commissioner under this section shall 
61.9 	be allowed to change therapy arrangements from an unrelated vendor to a related vendor 
61.10 	during the term of the contract. The commissioner may develop reasonable requirements 
61.11 	designed to prevent an increase in therapy utilization for residents enrolled in the medical 
61.12 	assistance program.
61.13 	(e) Nursing facilities participating in the alternative payment system demonstration 
61.14 	project must either participate in the alternative payment system quality improvement 
61.15 	program established by the commissioner or submit information on their own quality 
61.16 	improvement process to the commissioner for approval. Nursing facilities that have had 
61.17 	their own quality improvement process approved by the commissioner must report results 
61.18 	for at least one key area of quality improvement annually to the commissioner.

61.19 	Sec. 7. Minnesota Statutes 2014, section 256B.48, subdivision 2, is amended to read:
61.20 		Subd. 2.Reporting requirements. (a) No later than December 31 of each year, a 
61.21 	skilled nursing facility or an intermediate care facility, including boarding care facilities, 
61.22 	which receives medical assistance payments or other reimbursements from the state 
61.23 	agency shall:
61.24 	(1) provide the state agency with a copy of its audited financial statements. The 
61.25 	audited financial statements must include a balance sheet, income statement, statement 
61.26 	of the rate or rates charged to private paying residents, statement of retained earnings, 
61.27 	statement of cash flows, notes to the financial statements, audited applicable supplemental 
61.28 	information, and the certified public accountant's or licensed public accountant's opinion. 
61.29 	The examination by the certified public accountant or licensed public accountant shall 
61.30 	be conducted in accordance with generally accepted auditing standards as promulgated 
61.31 	and adopted by the American Institute of Certified Public Accountants. Beginning with 
61.32 	the reporting year which begins October 1, 1992, a nursing facility is no longer required 
61.33 	to have a certified audit of its financial statements. The cost of a certified audit shall not 
61.34 	be an allowable cost in that reporting year, nor in subsequent reporting years unless the 
61.35 	nursing facility submits its certified audited financial statements in the manner otherwise 
62.1 	specified in this subdivision. A nursing facility which does not submit a certified audit 
62.2 	must submit its working trial balance;
62.3 	(2) provide the state agency with a statement of ownership for the facility;
62.4 	(3) provide the state agency with separate, audited financial statements as specified 
62.5 	in clause (1) for every other facility owned in whole or part by an individual or entity 
62.6 	which has an ownership interest in the facility;
62.7 	(4) upon request, provide the state agency with separate, audited financial statements 
62.8 	as specified in clause (1) for every organization with which the facility conducts business 
62.9 	and which is owned in whole or in part by an individual or entity which has an ownership 
62.10 	interest in the facility;
62.11 	(5) provide the state agency with copies of leases, purchase agreements, and other 
62.12 	documents related to the lease or purchase of the nursing facility; and
62.13 	(6) upon request, provide the state agency with copies of leases, purchase 
62.14 	agreements, and other documents related to the acquisition of equipment, goods, and 
62.15 	services which are claimed as allowable costs; and.
62.16 	(7) permit access by the state agency to the certified public accountant's and licensed 
62.17 	public accountant's audit work papers which support the audited financial statements 
62.18 	required in clauses (1), (3), and (4).
62.19 	(b) Audited financial statements submitted under paragraph (a) must include 
62.20 	a balance sheet, income statement, statement of the rate or rates charged to private 
62.21 	paying residents, statement of retained earnings, statement of cash flows, notes to the 
62.22 	financial statements, audited applicable supplemental information, and the certified public 
62.23 	accountant's report. Certified public accountants must conduct audits in accordance with 
62.24 	chapter 326A. The cost of an audit shall not be an allowable cost unless the intermediate 
62.25 	care facility submits its audited financial statements in the manner otherwise specified in 
62.26 	this subdivision. An intermediate care facility must permit access by the state agency to 
62.27 	the certified public accountant's work papers that support the audited financial statements 
62.28 	submitted under paragraph (a).
62.29 	(c) Documents or information provided to the state agency pursuant to this 
62.30 	subdivision shall be public. 
62.31 	(d) If the requirements of clauses (1) to (7) paragraphs (a) and (b) are not met, the 
62.32 	reimbursement rate may be reduced to 80 percent of the rate in effect on the first day of 
62.33 	the fourth calendar month after the close of the reporting year, period and the reduction 
62.34 	shall continue until the requirements are met.
62.35 	(e) Both nursing facilities and Intermediate care facilities for the developmentally 
62.36 	disabled must maintain statistical and accounting records in sufficient detail to support 
63.1 	information contained in the facility's cost report for at least six years, including the year 
63.2 	following the submission of the cost report. For computerized accounting systems, the 
63.3 	records must include copies of electronically generated media such as magnetic discs 
63.4 	and tapes.

63.5 	Sec. 8. Minnesota Statutes 2014, section 256B.48, subdivision 3a, is amended to read:
63.6 		Subd. 3a.Audit adjustments. If the commissioner requests supporting 
63.7 	documentation during an audit for an item of cost reported by a long-term care an 
63.8 	intermediate care facility, and the long-term care facility's response does not adequately 
63.9 	document the item of cost, the commissioner may make reasoned assumptions considered 
63.10 	appropriate in the absence of the requested documentation to reasonably establish a 
63.11 	payment rate rather than disallow the entire item of cost. This provision shall not diminish 
63.12 	the long-term care facility's appeal rights.

63.13 	Sec. 9. Minnesota Statutes 2014, section 256B.50, subdivision 1a, is amended to read:
63.14 		Subd. 1a.Definitions. (a) For the purposes of this section, the following terms 
63.15 	have the meanings given.
63.16 	(a) (b) "Determination of a payment rate" means the process by which the 
63.17 	commissioner establishes the payment rate paid to a provider pursuant to this chapter, 
63.18 	including determinations made in desk audit, field audit, or pursuant to an amendment 
63.19 	filed by the provider.
63.20 	(b) (c) "Provider" means a nursing facility as defined in section 256B.421, subdivision 
63.21 	7 256R.02, subdivision 33, or a facility as defined in section 256B.501, subdivision 1.
63.22 	(c) "Reimbursement rules" means Minnesota Rules, parts 9510.0010 to 9510.0480, 
63.23 	9510.0500 to 9510.0890, and rules adopted by the commissioner pursuant to sections 
63.24 	256B.41 and 256B.501, subdivision 3.
63.25 	(d) The definitions in section 256R.02 apply to this section.

63.26 	Sec. 10. Minnesota Statutes 2015 Supplement, section 256I.05, subdivision 2, is 
63.27 	amended to read:
63.28 		Subd. 2.Monthly rates; exemptions. This subdivision applies to a residence 
63.29 	that on August 1, 1984, was licensed by the commissioner of health only as a boarding 
63.30 	care home, certified by the commissioner of health as an intermediate care facility, and 
63.31 	licensed by the commissioner of human services under Minnesota Rules, parts 9520.0500
63.32 	to 9520.0690. Notwithstanding the provisions of subdivision 1c, the rate paid to a facility 
63.33 	reimbursed under this subdivision shall be determined under section 256B.431, 256B.434, 
64.1 	or 256B.441 chapter 256R, if the facility is accepted by the commissioner for participation 
64.2 	in the alternative payment demonstration project. The rate paid to this facility shall also 
64.3 	include adjustments to the group residential housing rate according to subdivision 1, and 
64.4 	any adjustments applicable to supplemental service rates statewide.