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Immediate Change in Skilled Nursing Home Medicare Reimbursement with the Patient Driven Payment Model (PDPM) System

Medicare reimbursement will change effective October 1, 2019 with the Patient Driven Payment Model (PDPM) system replacing the previous Resource Utilization Group (RUG) rate system.

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Medicare reimbursement will change effective October 1, 2019 with the Patient Driven Payment Model (PDPM) system replacing the previous Resource Utilization Group (RUG) rate system.

Medicare reimbursement will change effective October 1, 2019 with the Patient Driven Payment Model (PDPM) system (which was finalized in July 2018) replacing the previous Resource Utilization Group (RUG) rate system. The Centers for Medicare & Medicaid Services (CMS) finalized this new model to achieve several objectives. The first of these objectives is to switch from a payment model focused on encouraging volume to one that encourages a focus on value of care provided. Additionally, CMS is seeking an improved coordination and communication between the individuals who are providing the care to the patients. Lastly, CMS hopes the PDPM will provide improved care with more positive outcomes while reducing the overall cost of the Medicare system. 

Reimbursement Impact 

As a result of PDPM, providers can expect an immediate impact to their reimbursement. From a global perspective, facilities that provide a large amount of therapy will likely see a decrease in reimbursement and facilities that treat more medically complex patients are more likely to see an increase in their reimbursement. Click here to view a spreadsheet compiling 2017 data (sorted by provider CCN numbers) that provides a rough estimate of the potential annual impact to overall Medicare reimbursement under the legacy RUG system versus the new PDPM system, as indicated in column AC.  

PDPM Reimbursement will be based on five main components. The components are: physical therapy, occupational therapy, speech language pathology, nursing and non-therapy ancillaries. Each of these five components will have rate methodology as follows: Base rate per component + case mix level = Per component rate. Furthermore, the per component rate of physical therapy, occupational therapy, and non-therapy ancillaries also includes an adjustment factor. In addition to the five components noted above, a non-case mix base rate is also added to the reimbursement rate, which is set by CMS and meant to account for typical costs such as therapy evaluations, room and board, and other costs related to therapy for non-rehabilitation groups. The summation of these components will create the PDPM reimbursement.  

The length of stay of Medicare patients in the nursing home will become a factor in the new payment model and could result in a decrease to your rate after a certain number of days. This contrasts with the current system that allows for a flat rate per day regardless of the length of stay. Two key factors favoring shorter stay trend are that the physical therapy and occupational rate components will be reduced by 2% weekly after day 20 and the adjustment factor within the non-therapy ancillary component is 3x in the first 3 days, before it drops down to 1 in days 4-100. Given this, nursing homes with higher Medicare length of stays may find it more challenging to generate revenue. Due to the significant complexities that will come into play under the new coding system, there will no longer be a “perfect patient,” and it is possible that clinically complex patients will be the most sought out by providers for higher reimbursement.  

Operational Impact 

Not only will PDPM have a significant impact to how reimbursement rates are calculated, but the new reimbursement system is expected to have an impact  on operations as well. Providers need to focus on these areas as changes will need to be implemented in order to maximize revenue. 

From a case management perspective, therapy minutes previously drove the reimbursement and, therefore, documentation of patient condition assessments for reimbursement purposes did not need to be as detailed. This is no longer the case as the entire case mix of a patient will drive the reimbursement under PDPM and, as such, all clinical needs will need to be documented in full to maximize revenues. This could potentially be a transition challenge for clinical staffParticularly certified nursing assistants (CNAs), who are closest to each patient and therefore will be relied on to accurately document all aspects of a patient condition, may have limited experience in this area. Registered nurses and licensed practical nurses will also need to provide oversight and document their monitoring of patient condition as well. Minimum Data Set (MDS) Coordinators can expect an impact as they will no longer be the primary individuals involved in the assessment process and need to provide training and oversight to clinical staffBeyond that, MDS Coordinators will need to learn the detailed PDPM regulations in order to strategize and streamline the assessment process to maximize reimbursements. From a logistical perspective, the timing of assessments will change and so the MDS coordinators will need to evaluate operational changes to comply with new timelines. 

The therapist role and dietician role are also expected to be impacted given the changes to reimbursement rates. For example, now that the reimbursement for therapy minutes will decrease under PDPM, there may be more of an emphasis on group therapy in order to maximizreimbursement while decreasing costs. Dieticians, whose services fall in the non-therapy ancillaries, are also expected to be impacted as the services they provide could generate more reimbursement. As such, dieticians will be relied on to participate in the assessment and become part of the revenue generating process.  

Beyond that, Medical Directors and Administrators need to be involved heavily from an operational standpoint. Medical directors will need to train and support clinical staff as complex medical care is emphasized under PDPM. Learning how to reduce unnecessary resources, improve favorable outcomes, reduce re-hospitalization, and improve documentation of diagnosis will be key to maximizing reimbursement. Administrators need to be prepared and plan the  necessary operational changes as staffing needs will need to be evaluated and necessary training needs to be provided. Administrators should consider bringing in external consulting to assist in bring their facility up to speed with PDPM.  

The impact on technology must also be considered as a system to track daily living needs of patients under PDPM will become much more important. Software vendors should be questioned about their preparation for PDPM but just investing the money alone will not be enough as emphasis needs to be placed on training. Now that clinical staff and others need to be more involved, they will need to learn the software and coding processes in order to accurately reflect patient condition. There is also “scrubber” software available, which can be used to comb through each patient assessment for potential missed opportunities in revenue generation.  

CMS expects PDPM to drive significant change to long-term care nursing facilities, impacting providers reimbursement and operations. Through these changes, CMS fully expects the objectives discussed in the introduction of this article to be met. Long-term care nursing facilities must be prepared, or the risk of lost revenue could be substantial. 

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