Under the current Medicaid reimbursement system in Minnesota for intermediate care facilities for the mentally retarded (ICFs/MR), payments are not targeted properly because there is no uniform assessment and resource use information to determine those clients for whom services are most costly to provide. A project was mandated by the state legislature to determine whether an alternative system could help the state better target resources where need was greatest. An assessment instrument was developed and completed on 913 clients in 65 ICFs/MR. The assessment focused on resource use in the domains of special medical treatments, activities of daily living, challenging behaviors, and personal/community integration. The characteristics captured by the assessment instrument explain approximately 30% of the variation among clients in terms of staff resource usage. Assessment scores are used to determine service classifications for clients, which are then used to calculate daily program reimbursement rates. Because a significant amount of variation in resource use is not accounted for by the assessment instrument, the facility's cost report for the previous year is also considered in the rate setting process. Fifteen suggested readings are listed. (JDD)