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S.F. No. 2539 - Nursing Facility Recodification
Author: Senator Tony Lourey
Prepared By: Liam Monahan, Senate Analyst (651/296-1791)
Date: March 10, 2016


S.F. 2539 recodifies into a new chapter the “nursing facility rates” language currently found in Minnesota Statutes, chapter 256B, particularly sections 256B.41 to 256B.48, and in Minnesota Rules, part 9549. Nonpartisan staff from the Revisor’s Office, House Research, and the Office of Senate Counsel prepared the language pursuant to Minnesota Laws 2015, chapter 71, article 6, section 43. When preparing the language, nonpartisan staff consulted with the Department of Human Services, the Department of Health, and stakeholders.

Given the complexity of the recodification of this language, staff elected to use a procedure called “repeal and reenact.” Given the amount of obsolete language and the redrafting required to eliminate obsolete, unnecessary, and redundant language, a recodification by renumbering was not practical. This approach explains the lengthy repealer.

Since the Department of Human Services and stakeholders are currently developing a reform proposal for property payment rates, staff elected to leave all property payment rate language in chapter 256B.  If the property payment rate reform language is enacted, it will be inserted into chapter 256R, and the old property payment rate language in chapter 256B will be repealed at that time.

In preparing the language, nonpartisan staff reorganized language for clarity and ease of use; deleted obsolete, unnecessary, and redundant language and redrafted remaining language for clarity; redrafted language for clarity and consistency; and drafted new language as required for clarity and consistency.

Staff extensively redrafted the language describing the calculations for determining the various components of the rates (see, in particular, sections 21 to 24).  These new descriptions, however, are mathematically equivalent to the descriptions in current statute.

The intent of this bill is to recodify the nursing facility payment rates language without creating any fiscal impact for the state or facilities.  The bill is not intended to change any existing policy, except that:

  • in section 8 (Minnesota Statutes, section 256R.08) the reporting dates and extension deadlines for financial statements is changed to coincide with the reporting dates for statistical and cost  reports; and
  • in section 9 (Minnesota Statutes, section 256R.09) the language concerning record retention is modernized to allow electronic record storage.



Section 1 (256R.01 - General) reorganizes general provisions and specifies that the rulemaking authority in subdivision 2 is not new authority.

Section 2 (256R.02 – Definitions) consolidates and reorganizes definitions; adds definitions from Minnesota Rules for “applicable credit,” “leave day,” “medical assistance program,” “real estate taxes,” “special assessment,” “working capital debt,” and “working capital interest expense;” adds for clarity new definitions for “case mix classification,” “cost to limit ratio,” “identifiable costs,” and “public accountant;” and redrafts definitions for clarity, particularly “employer health insurance costs.”  

Section 3 (256R.03 – Conditions of funding) consolidates and reorganizes language concerning a facility’s participation in the medical assistance (MA) program and its ability to receive payment under the program.

Section 4 (256R.04 – Prohibited practices) divides into subdivisions language from a single subdivision in section 256B.48.  Nearly all the language from the old “prohibited practices” subdivision is in this section except for language related to private paying residents, which is in section 5 (section 256R.06), and the last unlettered paragraph, which is moved to chapter 144A, as reflected in Article 2, section 1, of this bill.

Section 5 (256R.05 – Required practices)

Subdivision 1 (Preadmission screening) moves from section 256B.0911 language concerning preadmission screening as a prerequisite for payments to a nursing facility.

Subdivision 2 (Referrals to Medicare providers) contains the language that requires facilities that do not participate in Medicare to refer dual-eligible MA participants to a Medicare provider for Medicare-eligible stays and ensures that existing statutory penalties for violations continue to apply.

Section 6 (256R.05 – Private pay residents; required practices) consolidates and reorganizes language from rules and statute concerning private pay residents and ensures that all existing statutory penalties continue to apply.

Subdivisions 1 and 2 together are the “rate equalization” language. 

Section 7 (256R.07 – Adequate documentation) consolidates and reorganizes language from rules and statute concerning adequate documentation of costs and cost allocations.

Section 8 (256R.08 – Reporting of financial statements) reorganizes and redrafts for clarity language concerning reporting of financial statements and ensures that existing penalties continue to apply. Also, language concerning statistical and cost reports is moved to section 9 (Reporting of statistical and cost reports).

Section 9 (256R.09 – Reporting of statistical and cost reports) consolidates and reorganizes language, including language from rules, concerning the reporting of statistical and cost information. 

Subdivision 3 (Record retention) includes modernization of the record retention language.

Subdivision 6 (Amending statistical and cost information) includes new language describing the calculation of the statewide average operating payment rate, which is mentioned in existing statute but never described.

Section 10 (256R.10 – Allowed costs) consolidates and reorganizes language, including language from rules, concerning allowed costs, principles for determining if a cost is an allowed cost, and specifying specific conditions under which certain costs are allowed.

Section 11 (256R.11 – Nonallowed costs) consolidates language that specifies specific costs that are not allowed costs. This section also makes explicit that the rulemaking authority mentioned in subdivision 1 is a continuation of existing authority.

Section 12 (256R.12 – Cost allocation) consolidates language concerning the allocation of costs.

Section 13 (256R.13 – Auditing Requirements) consolidates and reorganizes language concerning the commissioner’s authority and duties with respect to auditing the statistical and cost reports of facilities, as well as the responsibilities of facilities during the audit process.

Section 14 (256R.16 – Quality of care) consolidates the language describing the calculation of facility-specific quality scores with language requiring the Commissioner of Human Services to use cost reports to monitor the quality of care in each facility and to report large reductions in the costs of care to the Commissioner of Health.

Section 15 (256R.17 – Case mix) removes obsolete language concerning old case mix classification systems and ensures consistent use of terms.

Section 16 (256R.21 – Total payment rate) provides new language describing the calculations used to determine each of the facility-specific component rates that are used to calculate each facility-specific total payment rate. While much of this language is new, it is included for the sake of clarity and completeness. The total payment rate is often referred to as the default rate, or the rate for a RUG weight of 1.00.

Section 17 (256R.22 – Case mix adjusted total payment rate) provides new language describing the calculation of the case mix adjusted rates.  This language is included for the sake of clarity and completeness. The only difference between the calculation in this section and the calculation in the prior section appears in subdivision 2, clause 1, where the facility’s direct-care payment rate is multiplied by a case mix index.

Section 18 (256R.23 – Total care-related payment rate) provides a new but mathematically equivalent description of the calculation of the first component of the total payment rate, which is the total care-related payment rate.  The total care-related payment rate is itself the sum of two rates, the direct-care payment rate and the other care-related payment rate, both of which are subject to facility-specific limits.

Section 19 (256R.24 – Other operating payment rate) consolidates language describing the calculation of the other operating payment rate.

Section 20 (256R.25 – External fixed costs payment rate) consolidates and clarifies the components of and the calculations for the external fixed costs payment rate.

Section 21 (256R.26 – Property payment rate) merely contains a cross-reference to the property rate language that is being left in Minnesota Statutes, chapter 256B, until a new property payment rate system is enacted. 

Section 22 (256R.32 – Appeals) contains the language permitting appeals of payment rates determined under Minnesota Statutes, chapter 256R.

Section 23 (256R.36 – Hold harmless) contains a simplified but equivalent version of the hold harmless language enacted in 2015.

Section 24 (256R.37 – Scholarships) contains the language concerning the scholarship portion of the external fixed costs payment rate.

Section 25 (256R.38 – Performance-based incentive payments) contains the language concerning the Performance Incentive Payment Program (PIPP) portion of the external fixed costs payment rate.

Section 26 (256R.39 – Quality improvement inventive program) contains the language concerning the Quality improvement inventive program (QIIP) portion of the external fixed costs payment rate.

Section 27 (256R. 40 – Nursing facility voluntary closure; alternatives) contains the language concerning the planned closure rate adjustment portion of the external fixed costs payment rate.

Section 28 (256R.41 – Single-bed room incentive) contains the language concerning the single-bed room incentive portion of the external fixed costs payment rate.

Section 29 (256R.42 – Rate adjustment for the first 30 days) contains the language allowing for a 20 percent increase in the case mix adjusted total payment rate during the first 30 calendar days of an admission.

Section 30 (256R.43 – Bed holds) contains the language requiring the commissioner to limit payments for leave days (i.e., bed holds).

Section 31 (256R.44 – Rate adjustment for private rooms for medical necessity) consolidates language from statute and rule concerning the total payment rate increase for private rooms.

Section 32 (256R.45 – Rate adjustment for ventilator-dependent persons) contains the language governing the negotiated rate increase for ventilator-dependent persons.

Section 33 (256R.46 – Specialized care facilities) contains the language concerning the 50 percent rate increase for specialized care facilities.

Section 34 (256R.47 – Rate adjustment for critical access nursing facilities) contains the language for the currently suspended rate adjustments for critical access nursing facilities.

Section 35 (256R.48 – Publicly owned facilities) contains the language concerning rate adjustments under the equitable cost-sharing for publicly owned nursing facility program (ECPN program).

Section 36 (256R.49 – Rate adjustment for compensation-related costs for minimum wage changes) contains the language allowing nursing facilities to apply for a rate increase to cover the costs of increases in the minimum wage.

Section 37 (256R.50 – Bed relocations) contains the language governing rate adjustments for facilities that relocate beds.

Section 38 (256R.51 – Adjustment for special dietary needs) consolidates language concerning the rate adjustments for providing special diets.

Section 39 (256R.52 – Nursing facility receivership fees) contains the language permitting a rate increase to a facility while it is in receivership, as well as the requirement that the commissioner seek to recover the amount of any such payment increase if the facility is sold or transferred.

Section 40 (256R.53 – Facility specific exemptions) contains the language for nonproperty-related facility-specific rate exceptions.

Section 41 (256R.54 – Ancillary services) contains language about billing for ancillary services, particularly therapy services, that are billed separately.

Section 42 (Revisor’s instruction) contains four Revisor’s instructions:

  1. make necessary cross-reference changes;
  2. make necessary technical and grammatical changes to preserve the meaning of the act;
  3. alter proposed coding to incorporate other enacted legislation; and
  4. incorporate amendments to existing statute that are subject to the repealer.

Section 43 (Repealer) repeals all the sections of Minnesota Statutes, chapter 256B, that were obsolete, unnecessary, redundant, or reenacted in chapter 256R. The repealer does not contain the property payment rate language, which is remaining in chapter 256B. The repealer also contains rules that are moved into statute.



Section 1 (144A.071, subdivision 2 – Moratorium on the certification of nursing home beds) moves a sentence from Minnesota Statutes, section 256B.48, subdivision 1, to the appropriate section of statute.

Section 2 (144A.15, subdivision 6 – Postreceivership period) removes from Department of Health statutes language concerning the authority of the Commissioner of Human Services to amend cost reports during receivership.  This language was moved to section 256R.52, subdivision 2, paragraph (d).

Section 3 (256B.0625, subdivision 57a – Payment limitation for Medicare-covered skilled nursing facility stays) moves language concerning a covered MA service out of the nursing facility rate language and places it in section 256B.0625 with the other covered services.

Section 4 (256B.19, subdivision 1e – Additional local share of certain nursing facility costs) updates this subdivision with conforming cross-references.

Section 5 (256B.431, subdivision 22 – Changes to nursing facility reimbursement) strikes obsolete language or language that was moved to Minnesota Statutes, chapter 256R, but retains property payment rate language.

Section 6 (256B.434, subdivision 10 – Exemptions) strikes obsolete language, but retains property payment rate language.

Section 7 (256B.48, subdivision 2 – reporting requirements) redrafts intermediate care facility specific language concerning the reporting of financial statements.  In the original Minnesota Statutes, chapter 256B, language, portions of this subdivision included language about both nursing facilities and intermediate care facilities. A version of the language specific to nursing homes was moved to chapter 256R, and this amended version for intermediate care facilities remains in chapter 256B.

Section 8 (256B.48, subdivision 3a – Audit adjustments) redrafts language that applied to both nursing facilities and intermediate care facilities (ICF). The ICF-specific language remains in Minnesota Statutes, chapter 256B, while the nursing specific language is moved to chapter 256R.

Section 9 (256B.50, subdivision 1a – Definitions) strikes an obsolete definition and retains the scope of the definitions from Minnesota Statute, chapter 256B, that were moved to chapter 256R.

Section 10 (256I.05, subdivision 2 – monthly rates, exemptions) makes a conforming change to a cross-reference.





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