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PDPM Is Poised to Transform the Way SNFs Do Business – Are You Ready?

Posted by eSolutions on Apr 16, 2019 9:53:03 AM
pdpm-blog-prepare-be-ready

If your Skilled Nursing Facility (SNF) is not prepared when October 1, 2019, rolls around, it may seem as though the RUG has been pulled out from under you.

As of that date, RUG-IV (Resource Utilization Group) codes for SNFs will cease to exist, replaced by the Patient-Driven Payment Model (PDPM). As a result, the way you calculate and receive reimbursements will change dramatically.

PDPM is poised to totally transform the way SNFs do business. Are you ready for the shift?

What is PDPM?

First things first, PDPM is the new Medicare Part A fee-for-service payment system from the Centers for Medicare and Medicaid Services (CMS). As of October 1, it will completely replace RUG-IV for calculating reimbursement for SNFs. Once PDPM takes effect, all payers that use the RUG system will have until September 30, 2020, to adjust their rate calculations accordingly.

According to CMS, the new payment model is meant to:

  • More accurately reimburse SNFs for the clinical care provided to patients
  • Lessen the incentive for SNFs to over-deliver therapy services
  • Simplify the payment process for SNFs

healthcare-treatment-clinicTo get there, PDPM is set to completely change the industry’s Medicare revenue model by removing therapy minutes as a determinant of payment and instead more closely tying funding to a patient’s clinical factors. This means PDPM will provide a completely new way of calculating reimbursement: Payments based on patient needs rather than on therapy minutes provided.

Under the current RUG system, most patients are classified into a therapy payment group, which uses the volume of therapy services a patient receives as the basis for payment. However, CMS said this has created a financial incentive for SNF providers to provide therapy to SNF patients regardless of the patient’s unique characteristics, goals or needs.

In its PDPM FAQ, CMS said the reason behind its decision to replace RUG with PDPM is to “eliminate this incentive and improve the overall accuracy and appropriateness of SNF payments by classifying patients into payment groups based on specific, data-driven patient characteristics, while simultaneously reducing the administrative burden on SNF providers.”

With PDPM, CMS is shifting the incentives away from the volume of physical, occupational, and speech therapy and toward patients’ true need for those services. In the SNF industry, reimbursement has been based mostly on hours of therapy, not quality of care. But PDPM will bring new rules and new ways of doing business.

As a result, SNFs should brace for the biggest overhaul to their reimbursement model in two decades. For SNFs, PDPM will take some getting used to.


Here are some of the key changes under PDPM:

  • patient-needs-over-therapy-minutesPatient needs trump therapy hours. The biggest shift under PDPM, of course, is that therapy hours are removed as the basis for reimbursement in favor of a patient’s classifications and anticipated needs during the course of his or her stay. Under PDPM, therapists won’t determine a resident’s overall care plan as they have in the past. With RUG-IV, therapy minutes delivered is the primary determinant of payment. Rates are constant throughout a patient’s length of stay, as long as the services provided stay constant. Under PDPM, therapy minutes delivered have no impact on reimbursement, and fewer therapy minutes are incentivized. Physical/occupational therapy (PT/OT) rates decline 2% every seventh day after the patient has stayed 20 days. Non-therapy ancillary (NTA) rates decline by two-thirds after the third day of a patient’s stay.

  • New case-mix-adjusted payment components are here. Under RUG-IV, there are two case-mix- indexed components (therapy and nursing), but PDPM features five. The PDPM classification methodology actually uses a combination of six payment components to determine reimbursement. Five of them are case-mix adjusted to cover use of SNF resources that vary according to patient characteristics, according to CMS. The sixth component is non-case-mix-adjusted to address use of SNF resources that do not vary by patient. Under PDPM, each patient will be assigned a case-mix classification that drives his/her daily reimbursement rate. To get that daily rate, the rates assigned to the five indexes are combined with a non-indexed component.

    PDPM groups patients into one of 10 clinical classifications that are used to help calculate the five case-mix-adjusted components:

    1. Physical therapy (PT)
    2. Occupational therapy (OT)
    3. Speech-language pathology (SLP) services
    4. Nursing services and social services (Nursing)
    5. Non-therapy ancillary (NTA) services

For three of the components – PT, OT and NTA – PDPM includes variable per-diem payment adjustments that modify payment based on changes in the use of these services during a patient’s stay.

  • pdpm-codingAccurate coding is critical. Under PDPM, ICD-10 coding forms the basis of reimbursement. This means it will be more important for SNFs to code accurately. According to a Skilled Nursing News’ 2019 reader survey, 63% of more than 400 respondents said PDPM would cause their organization to focus more on coding. Currently, IDC-10 codes aren’t used as well by SNFs because therapy and RUG groupers are driving their reimbursement. But SNFs will need to think about payments in a different way under PDPM. Your staff need not become coding experts, but accurate coding will be critical going forward.

  • Total therapy delivery capped at 25% of a patient’s overall care plan. Under RUG-IV, group and concurrent therapy are financially discouraged. PDPM caps group and concurrent therapy combined at 25% per patient, per discipline; based on group and concurrent caps, at least 75% of therapy must be individualized. Group therapy is defined as one therapist providing treatment for all patients who are working to develop a common skill, such as exercise or fall prevention. A group can include up to four patients. Concurrent means one therapist treating two Medicare patients at the same time. According to Skilled Nursing News, the use of group and concurrent services is typically below 1% under the RUG-IV system.
    pdpm-therapy-caps

  • MDS Coding now drives payment. Currently, there are 20 different Minimum Data Set (MDS) items to calculate the assignment of a RUG for payment. Under PDPM, there will be 188 items in the MDS that will factor into which of the five case-mix-adjusted categories a patient falls into for payment.


Preparing for PDPM

With the changes in mind, understanding how to prepare and effectively adjust to the new payment model is key to success. Here are some important things to consider before October 1:

  • Evaluate your care model. RUG-IV incentivizes high volumes of therapy to capture the maximum payment, but PDPM will require you to carefully manage how you deliver services in order to provide just the right level of service for each patient. With PDPM, the days of increasing therapy minutes to higher levels to collect bigger payments are over. SNFs who over-deliver therapy won’t get paid for services provided beyond the reimbursement level for each resident classification. But conversely, under-delivering therapy will result in poor patient outcomes and possible Medicare audits and take-backs.

  • Re-assess how you deliver services currently. Consultants suggest that providers will need to create solid, medically sound care plans for each patient that demonstrate clear needs when determining the types and quantities of services to offer each patient.

  • Develop a clear care model. Under PDPM, SNFs will need to develop a clear care plan for each patient from the beginning. SNFs must justify – in detail – each therapy intervention to avoid legal or regulatory issues. Establish data-driven protocols based on the patient’s clinical assessment to suggest a care plan that takes into account the reimbursement level for each patient and the outcomes model that CMS has embedded into PDPM.

  • Review/assess your intake process. Intake has always been important, but with PDPM, it will be absolutely critical. Many more factors must be assessed up front and if you mess up here, you won’t get reimbursed fully.

  • Accurately record patients’ diagnoses. Receiving the proper reimbursement for services will depend on whether SNFs accurately record patients’ diagnoses and specific medical issues. Experts say front-line nurses and MDS coordinators may not need to be experts, but they will need to be near perfect when performing initial assessments, according to Skilled Nursing News.

  • coding-trainingTrain your staff for MDS and coding. For PDPM, you'll need to make sure your staff is proficient in coding as well as talk to your EHR providers about how they allow for coding and the validation of those codes within the EHR, according to a clinical consultant who was speaking during a Skilled Nursing News webinar. PDPM will use ICD-10 diagnosis and procedural codes to classify SNF residents into one of 10 PDPM clinical categories, which will then be used to further classify a patient for payment purposes under PDPM. The new payment model will require more detail and accuracy with ICD-10 coding because starting October 1, ICD-10 code accuracy will be more closely tied to payments than ever before. While PDPM won't require you to hire a dedicated expert coder, it would be helpful to have one on staff to help navigate challenging coding changes.

  • Implement software for guiding treatment plans. Software that features advanced business intelligence and data analysis tools can help you predict future needs and manage costs under PDPM. It also will provide customizable treatment protocols that will allow you to deliver the appropriate level of care for each unique patient.

PDPM will require you to reassess and readjust your SNF care models and operations, so start taking steps today to get ready for PDPM. When RUG disappears, don’t be caught unprepared. Start preparing today. Don’t know where to start? Call on eSolutions to help with your transition to PDPM. We have the data intelligence and expertise you need to help you prepare and identify what strengths, weaknesses and challenges your SNF faces in preparing for PDPM. You can trust eSolutions to be your partner in PDPM success.

book-learningLearn More About PDPM

To help SNFs prepare for PDPM, CMS offers many resources online, including a PDPM training presentation, fact sheets and more. If you’re new to PDPM, you might want to start there. Those resources include three tools to help SNFs understand how patients will be classified into PDPM payment groups:


SNF PDPM Classification Walkthrough


SNF PDPM Grouper Tool


SNF PDPM NTA Comorbidity Mapping

Topics: Skilled Nursing