1.1.................... moves to amend H.F. No. 2150, the first engrossment, as follows:
1.2Pages 15 to 22, delete sections 2 to 11 and insert:

1.3    "Sec. 2. Minnesota Statutes 2012, section 256.9685, subdivision 1, is amended to read:
1.4    Subdivision 1. Authority. (a) The commissioner shall establish procedures for
1.5determining medical assistance and general assistance medical care payment rates under
1.6a prospective payment system for inpatient hospital services in hospitals that qualify as
1.7vendors of medical assistance. The commissioner shall establish, by rule, procedures for
1.8implementing this section and sections 256.9686, 256.969, and 256.9695. Services must
1.9meet the requirements of section 256B.04, subdivision 15, or 256D.03, subdivision 7,
1.10paragraph (b), to be eligible for payment.
1.11(b) The commissioner may reduce the types of inpatient hospital admissions that
1.12are required to be certified as medically necessary after notice in the State Register and a
1.1330-day comment period.

1.14    Sec. 3. Minnesota Statutes 2012, section 256.9685, subdivision 1a, is amended to read:
1.15    Subd. 1a. Administrative reconsideration. Notwithstanding sections 256B.04,
1.16subdivision 15 , and 256D.03, subdivision 7, the commissioner shall establish an
1.17administrative reconsideration process for appeals of inpatient hospital services determined
1.18to be medically unnecessary. A physician or hospital may request a reconsideration of
1.19the decision that inpatient hospital services are not medically necessary by submitting a
1.20written request for review to the commissioner within 30 days after receiving notice
1.21of the decision. The reconsideration process shall take place prior to the procedures of
1.22subdivision 1b and shall be conducted by physicians that are independent of the case
1.23under reconsideration. A majority decision by the physicians is necessary to make a
1.24determination that the services were not medically necessary.

1.25    Sec. 4. Minnesota Statutes 2012, section 256.9686, subdivision 2, is amended to read:
2.1    Subd. 2. Base year. "Base year" means a hospital's fiscal year that is recognized
2.2by the Medicare program or a hospital's fiscal year specified by the commissioner if a
2.3hospital is not required to file information by the Medicare program from which cost and
2.4statistical data are used to establish medical assistance and general assistance medical
2.5care payment rates.

2.6    Sec. 5. Minnesota Statutes 2012, section 256.969, subdivision 1, is amended to read:
2.7    Subdivision 1. Hospital cost index. (a) The hospital cost index shall be the change
2.8in the Consumer Price Index-All Items (United States city average) (CPI-U) forecasted
2.9by Data Resources, Inc. The commissioner shall use the indices as forecasted in the
2.10third quarter of the calendar year prior to the rate year. The hospital cost index may be
2.11used to adjust the base year operating payment rate through the rate year on an annually
2.12compounded basis.
2.13(b) For fiscal years beginning on or after July 1, 1993, the commissioner of human
2.14services shall not provide automatic annual inflation adjustments for hospital payment
2.15rates under medical assistance, nor under general assistance medical care, except that
2.16the inflation adjustments under paragraph (a) for medical assistance, excluding general
2.17assistance medical care, shall apply through calendar year 2001. The index for calendar
2.18year 2000 shall be reduced 2.5 percentage points to recover overprojections of the index
2.19from 1994 to 1996. The commissioner of management and budget shall include as a
2.20budget change request in each biennial detailed expenditure budget submitted to the
2.21legislature under section 16A.11 annual adjustments in hospital payment rates under
2.22medical assistance and general assistance medical care, based upon the hospital cost index.

2.23    Sec. 6. Minnesota Statutes 2012, section 256.969, subdivision 2, is amended to read:
2.24    Subd. 2. Diagnostic categories. The commissioner shall use to the extent possible
2.25existing diagnostic classification systems, including such as the system used by the
2.26Medicare program all patient refined diagnosis-related groups (APR-DRGs) or other
2.27similar classification programs to determine the relative values of inpatient services
2.28and case mix indices. The commissioner may combine diagnostic classifications into
2.29diagnostic categories and may establish separate categories and numbers of categories
2.30based on program eligibility or hospital peer group. Relative values shall be recalculated
2.31 recalibrated when the base year is changed. Relative value determinations shall include
2.32paid claims for admissions during each hospital's base year. The commissioner may
2.33extend the time period forward to obtain sufficiently valid information to establish relative
2.34values supplement the diagnostic classification systems data with national averages.
3.1Relative value determinations shall not include property cost data, Medicare crossover
3.2data, and data on admissions that are paid a per day transfer rate under subdivision 14. The
3.3computation of the base year cost per admission must include identified outlier cases and
3.4their weighted costs up to the point that they become outlier cases, but must exclude costs
3.5recognized in outlier payments beyond that point. The commissioner may recategorize the
3.6diagnostic classifications and recalculate recalibrate relative values and case mix indices
3.7to reflect actual hospital practices, the specific character of specialty hospitals, or to reduce
3.8variances within the diagnostic categories after notice in the State Register and a 30-day
3.9comment period. The commissioner shall recategorize the diagnostic classifications and
3.10recalculate relative values and case mix indices based on the two-year schedule in effect
3.11prior to January 1, 2013, reflected in subdivision 2b. The first recategorization shall occur
3.12January 1, 2013, and shall occur every two years after. When rates are not rebased under
3.13subdivision 2b, the commissioner may establish relative values and case mix indices based
3.14on charge data and may update the base year to the most recent data available.

3.15    Sec. 7. Minnesota Statutes 2012, section 256.969, subdivision 2b, is amended to read:
3.16    Subd. 2b. Operating Hospital payment rates. (a) For discharges occurring on and
3.17after September 1, 2014, hospital inpatient services for hospitals located in Minnesota
3.18shall be paid according to the following:
3.19    (1) critical access hospitals as defined by Medicare shall be paid using a cost-based
3.20methodology;
3.21    (2) long-term care hospitals as defined by Medicare shall be paid on a per diem
3.22methodology under subdivision 25;
3.23    (3) rehabilitation hospitals or units of hospitals that are recognized as rehabilitation
3.24distinct parts as defined by Medicare shall be paid according to the methodology under
3.25subdivision 12; and
3.26    (4) all other hospitals shall be paid on a diagnosis-related group (DRG) methodology.
3.27    (b) In determining operating payment rates for admissions occurring on or after the
3.28rate year beginning January 1, 1991, and every two years after, or more frequently as
3.29determined by the commissioner, the commissioner shall obtain operating data from an
3.30updated base year and establish operating payment rates per admission for each hospital
3.31based on the cost-finding methods and allowable costs of the Medicare program in effect
3.32during the base year. Rates under the general assistance medical care, medical assistance,
3.33and MinnesotaCare programs shall not be rebased to more current data on January 1, 1997,
3.34January 1, 2005, for the first 24 months of the rebased period beginning January 1, 2009.
3.35 For the rebased period beginning January 1, 2011, through August 31, 2014, rates shall not
4.1be rebased, except that a Minnesota long-term hospital shall be rebased effective January 1,
4.22011, based on its most recent Medicare cost report ending on or before September 1, 2008,
4.3with the provisions under subdivisions 9 and 23, based on the rates in effect on December
4.431, 2010. For subsequent rate setting periods after September 1, 2014, in which the base
4.5years are updated, a Minnesota long-term hospital's base year shall remain within the same
4.6period as other hospitals. Effective January 1, 2013, and after, rates shall not be rebased.
4.7(c) Effective for discharges occurring on and after September 1, 2014, payment rates
4.8for hospital inpatient services provided by hospitals located in Minnesota or the local trade
4.9area, except those hospitals paid under the methodologies under paragraph (a), clauses
4.10(2) and (3), shall be rebased incorporating cost and payment methodologies in a manner
4.11similar to Medicare. The base year for the rates effective September 1, 2014, shall be state
4.12fiscal year 2012. The rebasing must be budget neutral, ensuring that the total aggregate
4.13payments under the rebased system are equal to the total aggregate payments made for the
4.14same number and types of services in the base year. Separate budget neutrality calculations
4.15shall be determined for payments made to critical access hospitals and payments made to
4.16hospitals paid under the DRG system. Any rate increases or decreases under subdivision
4.173a that applied to the hospitals being rebased during the base period shall be incorporated
4.18into the budget neutrality calculation. Any rate increases or decreases that did not apply to
4.19the base period shall not be considered in the budget neutrality calculation.
4.20(d) For discharges occurring September 1, 2014, through and including June 30,
4.212016, the rebased rates shall include necessary adjustments to the projected rates that
4.22result in no greater than a five percent increase or decrease from the base year payments
4.23for any hospital. In addition to such adjustments, the commissioner may make adjustments
4.24to rates and must consider the impact of changes on at least the following when evaluating
4.25whether additional adjustments should be made:
4.26(1) pediatric services;
4.27(2) behavioral health services;
4.28(3) trauma services as defined by the National Uniform Billing Committee;
4.29(4) transplant services;
4.30(5) obstetric services, newborn services, and behavioral health services provided
4.31by hospitals outside the seven-county metropolitan area;
4.32(6) outlier admissions;
4.33(7) low volume providers; and
4.34(8) services provided by small rural hospitals that are not critical access hospitals.
4.35    (e) Hospital payment rates established under paragraph (c) shall incorporate the
4.36following:
5.1    (1) for hospitals paid under the DRG methodology, the base year operating payment
5.2rate per admission is standardized by the case mix index and adjusted by the hospital cost
5.3index, relative values, and disproportionate population adjustment. applicable Medicare
5.4wage index and adjusted by the hospital's disproportionate population adjustment;
5.5    (2) for critical access hospitals, interim per diem payment rates shall be based on the
5.6ratio of cost and charges reported on the base year Medicare cost report or reports and
5.7applied to medical assistance utilization data. Final settlement payments for a state fiscal
5.8year will be determined based on a review of the Medicaid cost report for the applicable
5.9state fiscal year;
5.10    (3) the cost and charge data used to establish operating hospital payment rates shall
5.11only reflect inpatient services covered by medical assistance and shall not include property
5.12cost information and costs recognized in outlier payments; and
5.13    (4) in determining hospital payment rates for discharges occurring on or after the
5.14rate year beginning January 1, 2011, through December 31, 2012, the hospital payment
5.15rate per discharge must be based on the cost-finding methods and allowable costs of the
5.16Medicare program in effect during the base year or years.

5.17    Sec. 8. Minnesota Statutes 2012, section 256.969, is amended by adding a subdivision
5.18to read:
5.19    Subd. 2d. Budget neutrality factor. For the rebased period effective September 1,
5.202014, when rebasing rates under subdivision 2b, paragraph (c), the commissioner must
5.21apply a budget neutrality factor if applicable to all hospitals' rebased rates to ensure that
5.22total DRG and critical access hospital payments to hospitals do not exceed total DRG and
5.23critical access hospital payments that would have been made to hospitals for the same
5.24number and types of services if the relative rates and weights had not been recalibrated
5.25and cost-based payments for critical access hospitals had not been established. For the
5.26purposes of this section, budget neutrality factor equals the percentage change from total
5.27aggregate payments calculated under a new payment system to total aggregate payments
5.28calculated under the old system for the same number and types of services.

5.29    Sec. 9. Minnesota Statutes 2012, section 256.969, is amended by adding a subdivision
5.30to read:
5.31    Subd. 2e. Interim payments. Notwithstanding subdivision 2b, for discharges
5.32occurring on or after September 1, 2014, and no later than June 30, 2015, the commissioner
5.33may implement an interim payment process to pay hospitals, including payments based on
5.34each hospital's average payments per claim for state fiscal years 2011 and 2012. These
6.1interim payments may be used to pay hospitals if the new payment system and rebasing
6.2under subdivision 2b is not complete by September 1, 2014. Claims paid at interim
6.3payment rates shall be reprocessed and paid at the rates established under the new system
6.4upon implementation of the new system.

6.5    Sec. 10. Minnesota Statutes 2012, section 256.969, is amended by adding a subdivision
6.6to read:
6.7    Subd. 2f. Report required. (a) The commissioner shall annually report to the
6.8legislature beginning March 1, 2015, and ending March 1, 2016, on the financial impacts
6.9by hospital and policy ramifications, if any, resulting from payment methodology changes
6.10implemented after August 31, 2014 and before December 31, 2015.
6.11(b) The commissioner shall provide, at a minimum, the following information:
6.12(1) case-mix adjusted calculations of net payment impacts for each hospital resulting
6.13from the difference between the payments each hospital would have received under the
6.14payment methodology for discharges before August 31, 2014, and the payments each
6.15hospital has or is expected to receive for the same number and types of services under the
6.16payment methodology implemented effective September 1, 2014;
6.17(2) any adjustments authorized under subdivision 2b, paragraph (d), that were made
6.18and the impacts of those adjustments; and
6.19(3) recommendations for further refinement or improvement of the hospital inpatient
6.20payment system or methodologies.

6.21    Sec. 11. Minnesota Statutes 2012, section 256.969, subdivision 3a, is amended to read:
6.22    Subd. 3a. Payments. (a) Acute care hospital billings under the medical
6.23assistance program must not be submitted until the recipient is discharged. However,
6.24the commissioner shall establish monthly interim payments for inpatient hospitals that
6.25have individual patient lengths of stay over 30 days regardless of diagnostic category.
6.26Except as provided in section 256.9693, medical assistance reimbursement for treatment
6.27of mental illness shall be reimbursed based on diagnostic classifications. Individual
6.28hospital payments established under this section and sections 256.9685, 256.9686, and
6.29256.9695 , in addition to third-party and recipient liability, for discharges occurring during
6.30the rate year shall not exceed, in aggregate, the charges for the medical assistance covered
6.31inpatient services paid for the same period of time to the hospital. This payment limitation
6.32shall be calculated separately for medical assistance and general assistance medical
6.33care services. The limitation on general assistance medical care shall be effective for
6.34admissions occurring on or after July 1, 1991. Services that have rates established under
7.1subdivision 11 or 12, must be limited separately from other services. After consulting with
7.2the affected hospitals, the commissioner may consider related hospitals one entity and may
7.3merge the payment rates while maintaining separate provider numbers. The operating and
7.4property base rates per admission or per day shall be derived from the best Medicare and
7.5claims data available when rates are established. The commissioner shall determine the
7.6best Medicare and claims data, taking into consideration variables of recency of the data,
7.7audit disposition, settlement status, and the ability to set rates in a timely manner. The
7.8commissioner shall notify hospitals of payment rates by December 1 of the year preceding
7.9the rate year 30 days prior to implementation. The rate setting data must reflect the
7.10admissions data used to establish relative values. Base year changes from 1981 to the base
7.11year established for the rate year beginning January 1, 1991, and for subsequent rate years,
7.12shall not be limited to the limits ending June 30, 1987, on the maximum rate of increase
7.13under subdivision 1. The commissioner may adjust base year cost, relative value, and case
7.14mix index data to exclude the costs of services that have been discontinued by the October
7.151 of the year preceding the rate year or that are paid separately from inpatient services.
7.16Inpatient stays that encompass portions of two or more rate years shall have payments
7.17established based on payment rates in effect at the time of admission unless the date of
7.18admission preceded the rate year in effect by six months or more. In this case, operating
7.19payment rates for services rendered during the rate year in effect and established based on
7.20the date of admission shall be adjusted to the rate year in effect by the hospital cost index.
7.21    (b) For fee-for-service admissions occurring on or after July 1, 2002, the total
7.22payment, before third-party liability and spenddown, made to hospitals for inpatient
7.23services is reduced by .5 percent from the current statutory rates.
7.24    (c) In addition to the reduction in paragraph (b), the total payment for fee-for-service
7.25admissions occurring on or after July 1, 2003, made to hospitals for inpatient services before
7.26third-party liability and spenddown, is reduced five percent from the current statutory
7.27rates. Mental health services within diagnosis related groups 424 to 432 or corresponding
7.28APR-DRGs, and facilities defined under subdivision 16 are excluded from this paragraph.
7.29    (d) In addition to the reduction in paragraphs (b) and (c), the total payment for
7.30fee-for-service admissions occurring on or after August 1, 2005, made to hospitals for
7.31inpatient services before third-party liability and spenddown, is reduced 6.0 percent from
7.32the current statutory rates. Mental health services within diagnosis related groups 424 to
7.33432 or corresponding APR-DRGs and facilities defined under subdivision 16 are excluded
7.34from this paragraph. Notwithstanding section 256.9686, subdivision 7, for purposes
7.35of this paragraph, medical assistance does not include general assistance medical care.
8.1 Payments made to managed care plans shall be reduced for services provided on or after
8.2January 1, 2006, to reflect this reduction.
8.3    (e) In addition to the reductions in paragraphs (b), (c), and (d), the total payment
8.4for fee-for-service admissions occurring on or after July 1, 2008, through June 30, 2009,
8.5made to hospitals for inpatient services before third-party liability and spenddown,
8.6is reduced 3.46 percent from the current statutory rates. Mental health services with
8.7diagnosis related groups 424 to 432 or corresponding APR-DRGs and facilities defined
8.8under subdivision 16 are excluded from this paragraph. Payments made to managed care
8.9plans shall be reduced for services provided on or after January 1, 2009, through June
8.1030, 2009, to reflect this reduction.
8.11    (f) In addition to the reductions in paragraphs (b), (c), and (d), the total payment
8.12for fee-for-service admissions occurring on or after July 1, 2009, through June 30, 2011,
8.13made to hospitals for inpatient services before third-party liability and spenddown, is
8.14reduced 1.9 percent from the current statutory rates. Mental health services with diagnosis
8.15related groups 424 to 432 or corresponding APR-DRGs and facilities defined under
8.16subdivision 16 are excluded from this paragraph. Payments made to managed care plans
8.17shall be reduced for services provided on or after July 1, 2009, through June 30, 2011,
8.18to reflect this reduction.
8.19    (g) In addition to the reductions in paragraphs (b), (c), and (d), the total payment
8.20for fee-for-service admissions occurring on or after July 1, 2011, made to hospitals for
8.21inpatient services before third-party liability and spenddown, is reduced 1.79 percent from
8.22the current statutory rates. Mental health services with diagnosis related groups 424 to 432
8.23or corresponding APR-DRGs and facilities defined under subdivision 16 are excluded
8.24from this paragraph. Payments made to managed care plans shall be reduced for services
8.25provided on or after July 1, 2011, to reflect this reduction.
8.26(h) In addition to the reductions in paragraphs (b), (c), (d), (f), and (g), the total
8.27payment for fee-for-service admissions occurring on or after July 1, 2009, made to
8.28hospitals for inpatient services before third-party liability and spenddown, is reduced
8.29one percent from the current statutory rates. Facilities defined under subdivision 16 are
8.30excluded from this paragraph. Payments made to managed care plans shall be reduced for
8.31services provided on or after October 1, 2009, to reflect this reduction.
8.32(i) In addition to the reductions in paragraphs (b), (c), (d), (g), and (h), the total
8.33payment for fee-for-service admissions occurring on or after July 1, 2011, made to
8.34hospitals for inpatient services before third-party liability and spenddown, is reduced
8.351.96 percent from the current statutory rates. Facilities defined under subdivision 16 are
9.1excluded from this paragraph. Payments made to managed care plans shall be reduced for
9.2services provided on or after January 1, 2011, to reflect this reduction.
9.3(j) Effective for discharges on and after September 1, 2014, from hospitals paid
9.4under subdivision 2b, paragraph (a), clauses (1) and (4), the rate adjustments in this
9.5subdivision shall be incorporated into the rebased rates established under subdivision 2b,
9.6paragraph (c), and shall not be applied to each claim.

9.7    Sec. 12. Minnesota Statutes 2012, section 256.969, subdivision 3b, is amended to read:
9.8    Subd. 3b. Nonpayment for hospital-acquired conditions and for certain
9.9treatments. (a) The commissioner must not make medical assistance payments to a
9.10hospital for any costs of care that result from a condition listed identified in paragraph
9.11(c), if the condition was hospital acquired.
9.12    (b) For purposes of this subdivision, a condition is hospital acquired if it is not
9.13identified by the hospital as present on admission. For purposes of this subdivision,
9.14medical assistance includes general assistance medical care and MinnesotaCare.
9.15(c) The prohibition in paragraph (a) applies to payment for each hospital-acquired
9.16condition listed identified in this paragraph that is represented by an ICD-9-CM or
9.17ICD-10-CM diagnosis code and is designated as a complicating condition or a major
9.18complicating condition:. The list of conditions shall be the hospital-acquired conditions
9.19list defined by the Centers for Medicare and Medicaid Services on an annual basis.
9.20(1) foreign object retained after surgery (ICD-9-CM codes 998.4 or 998.7);
9.21(2) air embolism (ICD-9-CM code 999.1);
9.22(3) blood incompatibility (ICD-9-CM code 999.6);
9.23(4) pressure ulcers stage III or IV (ICD-9-CM codes 707.23 or 707.24);
9.24(5) falls and trauma, including fracture, dislocation, intracranial injury, crushing
9.25injury, burn, and electric shock (ICD-9-CM codes with these ranges on the complicating
9.26condition and major complicating condition list: 800-829; 830-839; 850-854; 925-929;
9.27940-949; and 991-994);
9.28(6) catheter-associated urinary tract infection (ICD-9-CM code 996.64);
9.29(7) vascular catheter-associated infection (ICD-9-CM code 999.31);
9.30(8) manifestations of poor glycemic control (ICD-9-CM codes 249.10; 249.11;
9.31249.20; 249.21; 250.10; 250.11; 250.12; 250.13; 250.20; 250.21; 250.22; 250.23; and
9.32251.0);
9.33(9) surgical site infection (ICD-9-CM codes 996.67 or 998.59) following certain
9.34orthopedic procedures (procedure codes 81.01; 81.02; 81.03; 81.04; 81.05; 81.06; 81.07;
10.181.08; 81.23; 81.24; 81.31; 81.32; 81.33; 81.34; 81.35; 81.36; 81.37; 81.38; 81.83; and
10.281.85);
10.3(10) surgical site infection (ICD-9-CM code 998.59) following bariatric surgery
10.4(procedure codes 44.38; 44.39; or 44.95) for a principal diagnosis of morbid obesity
10.5(ICD-9-CM code 278.01);
10.6(11) surgical site infection, mediastinitis (ICD-9-CM code 519.2) following coronary
10.7artery bypass graft (procedure codes 36.10 to 36.19); and
10.8(12) deep vein thrombosis (ICD-9-CM codes 453.40 to 453.42) or pulmonary
10.9embolism (ICD-9-CM codes 415.11 or 415.19) following total knee replacement
10.10(procedure code 81.54) or hip replacement (procedure codes 00.85 to 00.87 or 81.51
10.11to 81.52).
10.12(d) The prohibition in paragraph (a) applies to any additional payments that result
10.13from a hospital-acquired condition listed identified in paragraph (c), including, but not
10.14limited to, additional treatment or procedures, readmission to the facility after discharge,
10.15increased length of stay, change to a higher diagnostic category, or transfer to another
10.16hospital. In the event of a transfer to another hospital, the hospital where the condition
10.17listed identified under paragraph (c) was acquired is responsible for any costs incurred at
10.18the hospital to which the patient is transferred.
10.19(e) A hospital shall not bill a recipient of services for any payment disallowed
10.20under this subdivision."
10.21Pages 23 to 28, delete sections 13 to 20 and insert:

10.22    "Sec. 14. Minnesota Statutes 2012, section 256.969, is amended by adding a
10.23subdivision to read:
10.24    Subd. 4b. Medical assistance cost reports for services. (a) A hospital that meets
10.25one of the following criteria must annually file medical assistance cost reports within six
10.26months of the end of the hospital's fiscal year:
10.27(1) a hospital designated as a critical access hospital that receives medical assistance
10.28payments; or
10.29(2) a Minnesota hospital or out-of-state hospital located within a Minnesota local
10.30trade area that receives a disproportionate population adjustment under subdivision 9.
10.31For purposes of this subdivision, local trade area has the meaning given in subdivision 17.
10.32(b) The Department of Human Services must suspend payments to any hospital that
10.33fails to file a report required under this subdivision. Payments must remain suspended
10.34until the report has been filed with and accepted by the Department of Human Services
10.35inpatient rates unit.

11.1    Sec. 15. Minnesota Statutes 2012, section 256.969, subdivision 6a, is amended to read:
11.2    Subd. 6a. Special considerations. In determining the payment rates, the
11.3commissioner shall consider whether the circumstances in subdivisions 7 8 to 14 exist.

11.4    Sec. 16. Minnesota Statutes 2012, section 256.969, subdivision 8, is amended to read:
11.5    Subd. 8. Unusual length of stay experience. (a) The commissioner shall establish
11.6day outlier thresholds for each diagnostic category established under subdivision 2 at
11.7two standard deviations beyond the mean length of stay. Payment for the days beyond
11.8the outlier threshold shall be in addition to the operating and property payment rates per
11.9admission established under subdivisions 2, and 2b, and 2c. Payment for outliers shall
11.10be at 70 percent of the allowable operating cost, after adjustment by the case mix index,
11.11hospital cost index, relative values and the disproportionate population adjustment. The
11.12outlier threshold for neonatal and burn diagnostic categories shall be established at one
11.13standard deviation beyond the mean length of stay, and payment shall be at 90 percent
11.14of allowable operating cost calculated in the same manner as other outliers. A hospital
11.15may choose an alternative to the 70 percent outlier payment that is at a minimum of 60
11.16percent and a maximum of 80 percent if the commissioner is notified in writing of the
11.17request by October 1 of the year preceding the rate year. The chosen percentage applies
11.18to all diagnostic categories except burns and neonates. The percentage of allowable cost
11.19that is unrecognized by the outlier payment shall be added back to the base year operating
11.20payment rate per admission.
11.21(b) Effective for transfers occurring on or after September 1, 2014, the commissioner
11.22shall establish payment rates for acute transfers that are based on Medicare methodologies.

11.23    Sec. 17. Minnesota Statutes 2012, section 256.969, subdivision 8a, is amended to read:
11.24    Subd. 8a. Short length of stay. Except as provided in subdivision 13, for
11.25admissions occurring on or after July 1, 1995, payment shall be determined as follows and
11.26shall be included in the base year for rate setting purposes:
11.27(1) for an admission that is categorized to a neonatal diagnostic related group
11.28in which the length of stay is less than 50 percent of the average length of stay for the
11.29category in the base year and the patient at admission is equal to or greater than the age of
11.30one, payments shall be established according to the methods of subdivision 14;
11.31(2) For an admission that is categorized to a diagnostic category that includes
11.32neonatal respiratory distress syndrome, the hospital must have a level II or level III
11.33nursery and the patient must receive treatment in that unit or payment will be made
11.34without regard to the syndrome condition.

12.1    Sec. 18. Minnesota Statutes 2012, section 256.969, is amended by adding a subdivision
12.2to read:
12.3    Subd. 8c. Hospital residents. Payments for hospital residents shall be made
12.4as follows:
12.5(1) payments for the first 180 days of inpatient care shall be the DRG system
12.6payment plus any appropriate outliers; and
12.7(2) payment for all medically necessary patient care subsequent to 180 days shall
12.8be reimbursed at a rate equal to 80 percent of the product of the statewide average
12.9cost-to-charge ratio multiplied by the usual and customary charges.

12.10    Sec. 19. Minnesota Statutes 2012, section 256.969, subdivision 9, is amended to read:
12.11    Subd. 9. Disproportionate numbers of low-income patients served. (a) For
12.12admissions occurring on or after October 1, 1992, through December 31, 1992, the
12.13medical assistance disproportionate population adjustment shall comply with federal law
12.14and shall be paid to a hospital, excluding regional treatment centers and facilities of the
12.15federal Indian Health Service, with a medical assistance inpatient utilization rate in excess
12.16of the arithmetic mean. The adjustment must be determined as follows:
12.17    (1) for a hospital with a medical assistance inpatient utilization rate above the
12.18arithmetic mean for all hospitals excluding regional treatment centers and facilities of the
12.19federal Indian Health Service but less than or equal to one standard deviation above the
12.20mean, the adjustment must be determined by multiplying the total of the operating and
12.21property payment rates by the difference between the hospital's actual medical assistance
12.22inpatient utilization rate and the arithmetic mean for all hospitals excluding regional
12.23treatment centers and facilities of the federal Indian Health Service; and
12.24    (2) for a hospital with a medical assistance inpatient utilization rate above one
12.25standard deviation above the mean, the adjustment must be determined by multiplying
12.26the adjustment that would be determined under clause (1) for that hospital by 1.1. If
12.27federal matching funds are not available for all adjustments under this subdivision, the
12.28commissioner shall reduce payments on a pro rata basis so that all adjustments qualify for
12.29federal match. The commissioner may establish a separate disproportionate population
12.30operating payment rate adjustment under the general assistance medical care program.
12.31For purposes of this subdivision medical assistance does not include general assistance
12.32medical care. The commissioner shall report annually on the number of hospitals likely to
12.33receive the adjustment authorized by this paragraph. The commissioner shall specifically
12.34report on the adjustments received by public hospitals and public hospital corporations
12.35located in cities of the first class.
13.1    (b) For admissions occurring on or after July 1, 1993, the medical assistance
13.2disproportionate population adjustment shall comply with federal law and shall be paid to
13.3a hospital, excluding regional treatment centers and facilities of the federal Indian Health
13.4Service, with a medical assistance inpatient utilization rate in excess of the arithmetic
13.5mean. The adjustment must be determined as follows:
13.6    (1) for a hospital with a medical assistance inpatient utilization rate above the
13.7arithmetic mean for all hospitals excluding regional treatment centers and facilities of the
13.8federal Indian Health Service but less than or equal to one standard deviation above the
13.9mean, the adjustment must be determined by multiplying the total of the operating and
13.10property payment rates by the difference between the hospital's actual medical assistance
13.11inpatient utilization rate and the arithmetic mean for all hospitals excluding regional
13.12treatment centers and facilities of the federal Indian Health Service; and
13.13    (2) for a hospital with a medical assistance inpatient utilization rate above one
13.14standard deviation above the mean, the adjustment must be determined by multiplying
13.15the adjustment that would be determined under clause (1) for that hospital by 1.1. The
13.16commissioner may establish a separate disproportionate population operating payment
13.17rate adjustment under the general assistance medical care program. For purposes of this
13.18subdivision, medical assistance does not include general assistance medical care. The
13.19commissioner shall report annually on the number of hospitals likely to receive the
13.20adjustment authorized by this paragraph. The commissioner shall specifically report on
13.21the adjustments received by public hospitals and public hospital corporations located in
13.22cities of the first class;.
13.23    (3) for a hospital that had medical assistance fee-for-service payment volume during
13.24calendar year 1991 in excess of 13 percent of total medical assistance fee-for-service
13.25payment volume, a medical assistance disproportionate population adjustment shall be
13.26paid in addition to any other disproportionate payment due under this subdivision as
13.27follows: $1,515,000 due on the 15th of each month after noon, beginning July 15, 1995.
13.28For a hospital that had medical assistance fee-for-service payment volume during calendar
13.29year 1991 in excess of eight percent of total medical assistance fee-for-service payment
13.30volume and was the primary hospital affiliated with the University of Minnesota, a
13.31medical assistance disproportionate population adjustment shall be paid in addition to any
13.32other disproportionate payment due under this subdivision as follows: $505,000 due on
13.33the 15th of each month after noon, beginning July 15, 1995; and
13.34    (4) effective August 1, 2005, the payments in paragraph (b), clause (3), shall be
13.35reduced to zero.
14.1    (c) The commissioner shall adjust rates paid to a health maintenance organization
14.2under contract with the commissioner to reflect rate increases provided in paragraph (b),
14.3clauses (1) and (2), on a nondiscounted hospital-specific basis but shall not adjust those
14.4rates to reflect payments provided in clause (3).
14.5    (d) If federal matching funds are not available for all adjustments under paragraph
14.6(b), the commissioner shall reduce payments under paragraph (b), clauses (1) and (2), on a
14.7pro rata basis so that all adjustments under paragraph (b) qualify for federal match.
14.8    (e) For purposes of this subdivision, medical assistance does not include general
14.9assistance medical care.
14.10    (f) For hospital services occurring on or after July 1, 2005, to June 30, 2007:
14.11    (1) general assistance medical care expenditures for fee-for-service inpatient and
14.12outpatient hospital payments made by the department shall be considered Medicaid
14.13disproportionate share hospital payments, except as limited below:
14.14     (i) only the portion of Minnesota's disproportionate share hospital allotment under
14.15section 1923(f) of the Social Security Act that is not spent on the disproportionate
14.16population adjustments in paragraph (b), clauses (1) and (2), may be used for general
14.17assistance medical care expenditures;
14.18     (ii) only those general assistance medical care expenditures made to hospitals that
14.19qualify for disproportionate share payments under section 1923 of the Social Security Act
14.20and the Medicaid state plan may be considered disproportionate share hospital payments;
14.21     (iii) only those general assistance medical care expenditures made to an individual
14.22hospital that would not cause the hospital to exceed its individual hospital limits under
14.23section 1923 of the Social Security Act may be considered; and
14.24     (iv) general assistance medical care expenditures may be considered only to the
14.25extent of Minnesota's aggregate allotment under section 1923 of the Social Security Act.
14.26All hospitals and prepaid health plans participating in general assistance medical care
14.27must provide any necessary expenditure, cost, and revenue information required by the
14.28commissioner as necessary for purposes of obtaining federal Medicaid matching funds for
14.29general assistance medical care expenditures; and
14.30    (2) (c) certified public expenditures made by Hennepin County Medical Center shall
14.31be considered Medicaid disproportionate share hospital payments. Hennepin County
14.32and Hennepin County Medical Center shall report by June 15, 2007, on payments made
14.33beginning July 1, 2005, or another date specified by the commissioner, that may qualify
14.34for reimbursement under federal law. Based on these reports, the commissioner shall
14.35apply for federal matching funds.
15.1    (g) (d) Upon federal approval of the related state plan amendment, paragraph (f) (c)
15.2 is effective retroactively from July 1, 2005, or the earliest effective date approved by the
15.3Centers for Medicare and Medicaid Services.

15.4    Sec. 20. Minnesota Statutes 2012, section 256.969, subdivision 10, is amended to read:
15.5    Subd. 10. Separate billing by certified registered nurse anesthetists. Hospitals
15.6may must exclude certified registered nurse anesthetist costs from the operating payment
15.7rate as allowed by section 256B.0625, subdivision 11. To be eligible, a hospital must
15.8notify the commissioner in writing by October 1 of even-numbered years to exclude
15.9certified registered nurse anesthetist costs. The hospital must agree that all hospital
15.10claims for the cost and charges of certified registered nurse anesthetist services will not
15.11be included as part of the rates for inpatient services provided during the rate year. In
15.12this case, the operating payment rate shall be adjusted to exclude the cost of certified
15.13registered nurse anesthetist services.
15.14For admissions occurring on or after July 1, 1991, and until the expiration date of
15.15section 256.9695, subdivision 3, services of certified registered nurse anesthetists provided
15.16on an inpatient basis may be paid as allowed by section 256B.0625, subdivision 11, when
15.17the hospital's base year did not include the cost of these services. To be eligible, a hospital
15.18must notify the commissioner in writing by July 1, 1991, of the request and must comply
15.19with all other requirements of this subdivision.

15.20    Sec. 21. Minnesota Statutes 2012, section 256.969, subdivision 12, is amended to read:
15.21    Subd. 12. Rehabilitation distinct parts. (a) Units of hospitals that are recognized
15.22as rehabilitation distinct parts by the Medicare program shall have separate provider
15.23numbers under the medical assistance program for rate establishment and billing
15.24purposes only. These units shall also have operating and property payment rates and the
15.25disproportionate population adjustment, if allowed by federal law, established separately
15.26from other inpatient hospital services.
15.27(b) The commissioner may shall establish separate relative values under subdivision
15.282 for rehabilitation hospitals and distinct parts as defined by the Medicare program.
15.29 Effective for discharges on or after September 1, 2014, the commissioner, to the extent
15.30possible, shall replicate the existing payment rate methodology under the new diagnostic
15.31classification system. The result must be budget neutral, ensuring that the total aggregate
15.32payments under the new system are equal to the total aggregate payments made for the
15.33same number and types of services in the base year, state fiscal year 2012.
16.1(c) For individual hospitals that did not have separate medical assistance
16.2rehabilitation provider numbers or rehabilitation distinct parts in the base year, hospitals
16.3shall provide the information needed to separate rehabilitation distinct part cost and claims
16.4data from other inpatient service data.

16.5    Sec. 22. Minnesota Statutes 2012, section 256.969, subdivision 14, is amended to read:
16.6    Subd. 14. Transfers. Except as provided in subdivisions 11 and 13, (a) Operating
16.7and property payment rates for admissions that result in transfers and transfers shall be
16.8established on a per day payment system. The per day payment rate shall be the sum of
16.9the adjusted operating and property payment rates determined under this subdivision and
16.10subdivisions 2, 2b, 2c, 3a, 4a, 5a, and 7 to 12, divided by the arithmetic mean length of
16.11stay for the diagnostic category. Each admission that results in a transfer and each transfer
16.12is considered a separate admission to each hospital, and the total of the admission and
16.13transfer payments to each hospital must not exceed the total per admission payment that
16.14would otherwise be made to each hospital under this subdivision and subdivisions 2, 2b,
16.152c, 3a, 4a, 5a, and 7 to 13 8 to 12.
16.16(b) Effective for transfers occurring on and after September 1, 2014, the commissioner
16.17shall establish payment rates for acute transfers that are based on Medicare methodologies.

16.18    Sec. 23. Minnesota Statutes 2012, section 256.969, subdivision 17, is amended to read:
16.19    Subd. 17. Out-of-state hospitals in local trade areas. Out-of-state hospitals that
16.20are located within a Minnesota local trade area and that have more than 20 admissions in
16.21the base year or years shall have rates established using the same procedures and methods
16.22that apply to Minnesota hospitals. For this subdivision and subdivision 18, local trade area
16.23means a county contiguous to Minnesota and located in a metropolitan statistical area as
16.24determined by Medicare for October 1 prior to the most current rebased rate year. Hospitals
16.25that are not required by law to file information in a format necessary to establish rates shall
16.26have rates established based on the commissioner's estimates of the information. Relative
16.27values of the diagnostic categories shall not be redetermined under this subdivision until
16.28required by rule statute. Hospitals affected by this subdivision shall then be included in
16.29determining relative values. However, hospitals that have rates established based upon
16.30the commissioner's estimates of information shall not be included in determining relative
16.31values. This subdivision is effective for hospital fiscal years beginning on or after July
16.321, 1988. A hospital shall provide the information necessary to establish rates under this
16.33subdivision at least 90 days before the start of the hospital's fiscal year.

17.1    Sec. 24. Minnesota Statutes 2012, section 256.969, subdivision 18, is amended to read:
17.2    Subd. 18. Out-of-state hospitals outside local trade areas. Hospitals that are
17.3not located within Minnesota or a Minnesota local trade area shall have operating and
17.4property inpatient hospital rates established at the average of statewide and local trade area
17.5rates or, at the commissioner's discretion, at an amount negotiated by the commissioner.
17.6Relative values shall not include data from hospitals that have rates established under this
17.7subdivision. Payments, including third-party and recipient liability, established under this
17.8subdivision may not exceed the charges on a claim specific basis for inpatient services that
17.9are covered by medical assistance.

17.10    Sec. 25. Minnesota Statutes 2012, section 256.969, subdivision 25, is amended to read:
17.11    Subd. 25. Long-term hospital rates. (a) Long-term hospitals shall be paid a per
17.12diem rate established by the commissioiner.
17.13(b)For admissions occurring on or after April 1, 1995, a long-term hospital as
17.14designated by Medicare that does not have admissions in the base year shall have
17.15inpatient rates established at the average of other hospitals with the same designation. For
17.16subsequent rate-setting periods in which base years are updated, the hospital's base year
17.17shall be the first Medicare cost report filed with the long-term hospital designation and
17.18shall remain in effect until it falls within the same period as other hospitals.

17.19    Sec. 26. Minnesota Statutes 2012, section 256.969, subdivision 30, is amended to read:
17.20    Subd. 30. Payment rates for births. (a) For admissions occurring on or after
17.21October 1, 2009, September 1, 2014,the total operating and property payment rate,
17.22excluding disproportionate population adjustment, for the following diagnosis-related
17.23groups, as they fall within the diagnostic APR-DRG categories: (1) 371 cesarean section
17.24without complicating diagnosis; (2) 372 vaginal delivery with complicating diagnosis;
17.25and (3) 373 vaginal delivery without complicating diagnosis, 5401, 5402, 5403, and 5404
17.26cesarean section, shall be no greater than $3,528.
17.27(b) The rates described in this subdivision do not include newborn care.
17.28(c) Payments to managed care and county-based purchasing plans under section
17.29256B.69 , 256B.692, or 256L.12 shall be reduced for services provided on or after October
17.301, 2009, to reflect the adjustments in paragraph (a).
17.31(d) Prior authorization shall not be required before reimbursement is paid for a
17.32cesarean section delivery."
17.33Page 32, delete section 25 and insert:

17.34    "Sec. 31. Minnesota Statutes 2012, section 256B.199, is amended to read:
18.1256B.199 PAYMENTS REPORTED BY GOVERNMENTAL ENTITIES.
18.2    (a) Effective July 1, 2007, The commissioner shall apply for federal matching
18.3funds for the expenditures in paragraphs (b) and (c). Effective September 1, 2011, the
18.4commissioner shall apply for matching funds for expenditures in paragraph (e).
18.5    (b) The commissioner shall apply for federal matching funds for certified public
18.6expenditures as follows:
18.7    (1) Hennepin County, Hennepin County Medical Center, Ramsey County, and
18.8 Regions Hospital, the University of Minnesota, and Fairview-University Medical Center
18.9 shall report quarterly to the commissioner beginning June 1, 2007, payments made during
18.10the second previous quarter that may qualify for reimbursement under federal law;
18.11     (2) based on these reports, the commissioner shall apply for federal matching
18.12funds. These funds are appropriated to the commissioner for the payments under section
18.13256.969, subdivision 27; and
18.14     (3) by May 1 of each year, beginning May 1, 2007, the commissioner shall inform
18.15the nonstate entities listed in paragraph (a) of the amount of federal disproportionate share
18.16hospital payment money expected to be available in the current federal fiscal year.
18.17    (c) The commissioner shall apply for federal matching funds for general assistance
18.18medical care expenditures as follows:
18.19    (1) for hospital services occurring on or after July 1, 2007, general assistance medical
18.20care expenditures for fee-for-service inpatient and outpatient hospital payments made by
18.21the department shall be used to apply for federal matching funds, except as limited below:
18.22    (i) only those general assistance medical care expenditures made to an individual
18.23hospital that would not cause the hospital to exceed its individual hospital limits under
18.24section 1923 of the Social Security Act may be considered; and
18.25    (ii) general assistance medical care expenditures may be considered only to the extent
18.26of Minnesota's aggregate allotment under section 1923 of the Social Security Act; and
18.27    (2) all hospitals must provide any necessary expenditure, cost, and revenue
18.28information required by the commissioner as necessary for purposes of obtaining federal
18.29Medicaid matching funds for general assistance medical care expenditures.
18.30(d) (c) For the period from April 1, 2009, to September 30, 2010, the commissioner
18.31shall apply for additional federal matching funds available as disproportionate share
18.32hospital payments under the American Recovery and Reinvestment Act of 2009. These
18.33funds shall be made available as the state share of payments under section 256.969,
18.34subdivision 28 . The entities required to report certified public expenditures under
18.35paragraph (b), clause (1), shall report additional certified public expenditures as necessary
18.36under this paragraph.
19.1(e) (d) For services provided on or after September 1, 2011, the commissioner shall
19.2apply for additional federal matching funds available as disproportionate share hospital
19.3payments under the MinnesotaCare program according to the requirements and conditions
19.4of paragraph (c). A hospital may elect on an annual basis to not be a disproportionate
19.5share hospital for purposes of this paragraph, if the hospital does not qualify for a payment
19.6under section 256.969, subdivision 9, paragraph (b)."
19.7Page 35, delete section 29 and insert:

19.8    "Sec. 35. REPEALER.
19.9Minnesota Statutes 2012, sections 256.969, subdivisions 2c, 8b, 9a, 9b, 11, 13, 20,
19.1021, 22, 26, 27, and 28; and 256.9695, subdivisions 3 and 4, are repealed."
19.11Renumber the sections in sequence and correct the internal references
19.12Amend the title accordingly