This bill proposes amendments to Minnesota Statutes 2024, section 256.969, subdivision 2b, modifying hospital payment rates for inpatient services under the state's Medical Assistance (Medicaid) program.

Key Changes in the Bill:

1. Hospital Payment Methodologies:

   • Maintains different payment methodologies for various types of hospitals:
     • Critical access hospitals will continue to be paid using a cost-based methodology.
     • Long-term hospitals will be paid under a per diem model.
     • Rehabilitation hospitals will adhere to a specific Medicare-based methodology.
     • All other hospitals will still be reimbursed using a Diagnosis-Related Group (DRG) methodology.

2. Rebasing of Payment Rates:

   • Rebasing ensures payment rates reflect changes in hospital costs.
   • Effective July 1, 2025, and subsequently every two years, payment rates must be updated.
   • Any altered inpatient claims volume due to emergencies (e.g., pandemics) will be excluded from base year calculations.
   • Adjustments will use either the hospital cost index or the change in case-mix-adjusted cost per claim, whichever is lower.

3. Budget Neutrality:

   • Rebasing must be budget neutral, meaning total payments must not exceed total payments in the base year.
   • Separate neutrality calculations will exist for critical access hospitals and DRG hospitals.

4. New Cost-Based Model for Critical Access Hospitals (CAHs):

   • Establishes tiers of payments based on hospital efficiency.
   • Ensures no hospital receives a payment greater than 100% of its base year costs.
   • New reimbursement levels based on prior cost coverage:
     • ≤ 80% of costs covered → Payment set at 85% of base year costs.
     • 80-90% of costs covered → Payment set at 95% of base year costs.
     • > 90% of costs covered → Payment set at 100% of base year costs.
   • Rate increases for cost-based hospitals will be adjusted annually for inflation using a hospital cost index.

5. Adjustments in Payment Rates:

   • The commissioner of human services may adjust rates to avoid drastic financial impacts (e.g., no more than a 5% reduction for any hospital in a rebasing period).
   • Adjustments consider impacts on:
     • Pediatric services
       
     • Behavioral health services
       
     • Trauma and transplant services
       
     • Obstetric and newborn care for rural hospitals
       
     • Outlier admissions and small rural hospitals
       

6. Inclusion of Medical Education Costs:

   • Effective January 1, 2024, hospitals receiving funds for medical education and research under section 62J.692 will have a hospital-specific rate adjustment factored into their payment rates.

Overall Impact:

• Ensures Medicaid hospital payments better align with actual costs.
• Promotes cost efficiency for hospitals while ensuring continued access to essential hospital services across Minnesota.
• Limits sudden financial shocks for hospitals by capping rate decreases.

This bill reflects an effort to create a more sustainable and predictable hospital payment system under Medicaid while maintaining broad access to care, especially for rural and critical access hospitals.