1.1                          A bill for an act 
  1.2             relating to human services; redefining geographic 
  1.3             groups for medical assistance reimbursement purposes; 
  1.4             authorizing the commissioner of human services to 
  1.5             negotiate rate increases with certain nursing 
  1.6             facilities under certain circumstances; appropriating 
  1.7             money; amending Minnesota Statutes 1998, section 
  1.8             256B.431, subdivision 2b, and by adding a subdivision. 
  1.9   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.10     Section 1.  Minnesota Statutes 1998, section 256B.431, 
  1.11  subdivision 2b, is amended to read: 
  1.12     Subd. 2b.  [OPERATING COSTS, AFTER JULY 1, 1985.] (a) For 
  1.13  rate years beginning on or after July 1, 1985, the commissioner 
  1.14  shall establish procedures for determining per diem 
  1.15  reimbursement for operating costs.  
  1.16     (b) The commissioner shall contract with an econometric 
  1.17  firm with recognized expertise in and access to national 
  1.18  economic change indices that can be applied to the appropriate 
  1.19  cost categories when determining the operating cost payment rate.
  1.20     (c) The commissioner shall analyze and evaluate each 
  1.21  nursing facility's cost report of allowable operating costs 
  1.22  incurred by the nursing facility during the reporting year 
  1.23  immediately preceding the rate year for which the payment rate 
  1.24  becomes effective.  
  1.25     (d) The commissioner shall establish limits on actual 
  1.26  allowable historical operating cost per diems based on cost 
  1.27  reports of allowable operating costs for the reporting year that 
  2.1   begins October 1, 1983, taking into consideration relevant 
  2.2   factors including resident needs, geographic location, and size 
  2.3   of the nursing facility.  In developing the geographic groups 
  2.4   for purposes of reimbursement under this section, the 
  2.5   commissioner shall ensure that nursing facilities in any county 
  2.6   contiguous to the Minneapolis-St. Paul seven-county metropolitan 
  2.7   area are included in the same geographic group.  In addition to 
  2.8   the counties listed in Minnesota Rules, part 9549.0052, subpart 
  2.9   4, the counties of Chisago, Isanti, Sherburne, and Wright must 
  2.10  be placed in geographic group III.  The limits established by 
  2.11  the commissioner shall not be less, in the aggregate, than the 
  2.12  60th percentile of total actual allowable historical operating 
  2.13  cost per diems for each group of nursing facilities established 
  2.14  under subdivision 1 based on cost reports of allowable operating 
  2.15  costs in the previous reporting year.  For rate years beginning 
  2.16  on or after July 1, 1989, facilities located in geographic group 
  2.17  I as described in Minnesota Rules, part 9549.0052, on January 1, 
  2.18  1989, may choose to have the commissioner apply either the care 
  2.19  related limits or the other operating cost limits calculated for 
  2.20  facilities located in geographic group II, or both, if either of 
  2.21  the limits calculated for the group II facilities is higher.  
  2.22  The efficiency incentive for geographic group I nursing 
  2.23  facilities must be calculated based on geographic group I 
  2.24  limits.  The phase-in must be established utilizing the chosen 
  2.25  limits.  For purposes of these exceptions to the geographic 
  2.26  grouping requirements, the definitions in Minnesota Rules, parts 
  2.27  9549.0050 to 9549.0059 (Emergency), and 9549.0010 to 9549.0080, 
  2.28  apply.  The limits established under this paragraph remain in 
  2.29  effect until the commissioner establishes a new base period.  
  2.30  Until the new base period is established, the commissioner shall 
  2.31  adjust the limits annually using the appropriate economic change 
  2.32  indices established in paragraph (e).  In determining allowable 
  2.33  historical operating cost per diems for purposes of setting 
  2.34  limits and nursing facility payment rates, the commissioner 
  2.35  shall divide the allowable historical operating costs by the 
  2.36  actual number of resident days, except that where a nursing 
  3.1   facility is occupied at less than 90 percent of licensed 
  3.2   capacity days, the commissioner may establish procedures to 
  3.3   adjust the computation of the per diem to an imputed occupancy 
  3.4   level at or below 90 percent.  The commissioner shall establish 
  3.5   efficiency incentives as appropriate.  The commissioner may 
  3.6   establish efficiency incentives for different operating cost 
  3.7   categories.  The commissioner shall consider establishing 
  3.8   efficiency incentives in care related cost categories.  The 
  3.9   commissioner may combine one or more operating cost categories 
  3.10  and may use different methods for calculating payment rates for 
  3.11  each operating cost category or combination of operating cost 
  3.12  categories.  For the rate year beginning on July 1, 1985, the 
  3.13  commissioner shall: 
  3.14     (1) allow nursing facilities that have an average length of 
  3.15  stay of 180 days or less in their skilled nursing level of care, 
  3.16  125 percent of the care related limit and 105 percent of the 
  3.17  other operating cost limit established by rule; and 
  3.18     (2) exempt nursing facilities licensed on July 1, 1983, by 
  3.19  the commissioner to provide residential services for the 
  3.20  physically handicapped under Minnesota Rules, parts 9570.2000 to 
  3.21  9570.3600, from the care related limits and allow 105 percent of 
  3.22  the other operating cost limit established by rule. 
  3.23     For the purpose of calculating the other operating cost 
  3.24  efficiency incentive for nursing facilities referred to in 
  3.25  clause (1)  or (2), the commissioner shall use the other 
  3.26  operating cost limit established by rule before application of 
  3.27  the 105 percent. 
  3.28     (e) The commissioner shall establish a composite index or 
  3.29  indices by determining the appropriate economic change 
  3.30  indicators to be applied to specific operating cost categories 
  3.31  or combination of operating cost categories.  
  3.32     (f) Each nursing facility shall receive an operating cost 
  3.33  payment rate equal to the sum of the nursing facility's 
  3.34  operating cost payment rates for each operating cost category.  
  3.35  The operating cost payment rate for an operating cost category 
  3.36  shall be the lesser of the nursing facility's historical 
  4.1   operating cost in the category increased by the appropriate 
  4.2   index established in paragraph (e) for the operating cost 
  4.3   category plus an efficiency incentive established pursuant to 
  4.4   paragraph (d) or the limit for the operating cost category 
  4.5   increased by the same index.  If a nursing facility's actual 
  4.6   historic operating costs are greater than the prospective 
  4.7   payment rate for that rate year, there shall be no retroactive 
  4.8   cost settle-up.  In establishing payment rates for one or more 
  4.9   operating cost categories, the commissioner may establish 
  4.10  separate rates for different classes of residents based on their 
  4.11  relative care needs.  
  4.12     (g) The commissioner shall include the reported actual real 
  4.13  estate tax liability or payments in lieu of real estate tax of 
  4.14  each nursing facility as an operating cost of that nursing 
  4.15  facility.  Allowable costs under this subdivision for payments 
  4.16  made by a nonprofit nursing facility that are in lieu of real 
  4.17  estate taxes shall not exceed the amount which the nursing 
  4.18  facility would have paid to a city or township and county for 
  4.19  fire, police, sanitation services, and road maintenance costs 
  4.20  had real estate taxes been levied on that property for those 
  4.21  purposes.  For rate years beginning on or after July 1, 1987, 
  4.22  the reported actual real estate tax liability or payments in 
  4.23  lieu of real estate tax of nursing facilities shall be adjusted 
  4.24  to include an amount equal to one-half of the dollar change in 
  4.25  real estate taxes from the prior year.  The commissioner shall 
  4.26  include a reported actual special assessment, and reported 
  4.27  actual license fees required by the Minnesota department of 
  4.28  health, for each nursing facility as an operating cost of that 
  4.29  nursing facility.  For rate years beginning on or after July 1, 
  4.30  1989, the commissioner shall include a nursing facility's 
  4.31  reported Public Employee Retirement Act contribution for the 
  4.32  reporting year as apportioned to the care-related operating cost 
  4.33  categories and other operating cost categories multiplied by the 
  4.34  appropriate composite index or indices established pursuant to 
  4.35  paragraph (e) as costs under this paragraph.  Total adjusted 
  4.36  real estate tax liability, payments in lieu of real estate tax, 
  5.1   actual special assessments paid, the indexed Public Employee 
  5.2   Retirement Act contribution, and license fees paid as required 
  5.3   by the Minnesota department of health, for each nursing facility 
  5.4   (1) shall be divided by actual resident days in order to compute 
  5.5   the operating cost payment rate for this operating cost 
  5.6   category, (2) shall not be used to compute the care-related 
  5.7   operating cost limits or other operating cost limits established 
  5.8   by the commissioner, and (3) shall not be increased by the 
  5.9   composite index or indices established pursuant to paragraph 
  5.10  (e), unless otherwise indicated in this paragraph. 
  5.11     (h) For rate years beginning on or after July 1, 1987, the 
  5.12  commissioner shall adjust the rates of a nursing facility that 
  5.13  meets the criteria for the special dietary needs of its 
  5.14  residents and the requirements in section 31.651.  The 
  5.15  adjustment for raw food cost shall be the difference between the 
  5.16  nursing facility's allowable historical raw food cost per diem 
  5.17  and 115 percent of the median historical allowable raw food cost 
  5.18  per diem of the corresponding geographic group. 
  5.19     The rate adjustment shall be reduced by the applicable 
  5.20  phase-in percentage as provided under subdivision 2h. 
  5.21     Sec. 2.  Minnesota Statutes 1998, section 256B.431, is 
  5.22  amended by adding a subdivision to read: 
  5.23     Subd. 28.  [NEGOTIATED RATE INCREASES.] (a) For rate years 
  5.24  beginning on or after July 1, 1999, the commissioner may 
  5.25  negotiate rate increases with nursing facilities reimbursed 
  5.26  under this section or under section 256B.434. 
  5.27     (b) Increases negotiated under this subdivision may take 
  5.28  effect on any date agreed to in a contract between the 
  5.29  commissioner and the facility and shall be in addition to any 
  5.30  rate increases otherwise provided by law.  Increases may be 
  5.31  approved only within the limits of money specifically 
  5.32  appropriated for this purpose. 
  5.33     (c) The commissioner shall develop an application process 
  5.34  for facilities to apply for a negotiated rate increase.  The 
  5.35  application must include: 
  5.36     (1) an audited financial statement, including a profit and 
  6.1   loss statement; 
  6.2      (2) a description of the difficulties the facility is 
  6.3   experiencing because of insufficient reimbursement and an 
  6.4   explanation of the inability to address these difficulties with 
  6.5   current funding; and 
  6.6      (3) an improvement plan for the use of the proposed rate 
  6.7   increase.  The plan may include quality improvements, work force 
  6.8   upgrades, worker compensation or benefit increases, 
  6.9   implementation of innovative methods, or other changes in 
  6.10  facility operation. 
  6.11     (d) To be eligible for a rate increase under this 
  6.12  subdivision, a facility must: 
  6.13     (1) have an operating cost per diem at or below the 
  6.14  median.  The median shall be established according to the 
  6.15  methodology in subdivision 26 with facilities reimbursed under 
  6.16  this section and under section 256B.434 arrayed together.  For 
  6.17  purposes of establishing the operating cost per diem for a 
  6.18  facility reimbursed under section 256B.434, the commissioner 
  6.19  shall determine the operating cost reported by the facility on 
  6.20  its last cost report filed under this section and trend that 
  6.21  amount forward by the annual inflationary adjustments applied to 
  6.22  the facility's overall rate since its conversion to 
  6.23  reimbursement under section 256B.434; and 
  6.24     (2) have operating costs that are relatively high as 
  6.25  determined by the commissioner in comparison to operating cost 
  6.26  per diem payments. 
  6.27     (e) A facility approved for an increase under this 
  6.28  subdivision must report to the commissioner on implementation of 
  6.29  the improvement plan, including a comparison of actual 
  6.30  expenditures compared with expenditures projected as part of the 
  6.31  plan. 
  6.32     (f) The commissioner shall recover any per diem increases 
  6.33  granted under this section and not expended according to the 
  6.34  contract and may increase per diem amounts if implementation of 
  6.35  the improvement plan is determined to be more costly than 
  6.36  anticipated. 
  7.1      Sec. 3.  [APPROPRIATION.] 
  7.2      $....... is appropriated from the general fund to the 
  7.3   commissioner of human services for the biennium beginning July 
  7.4   1, 1999, for the purposes of sections 1 and 2.