​A new report by Avalere Health examining the impact of the changes resulting from the transition to the Patient-Driven Payment Model (PDPM) said more time and data are needed before any conclusions can be made on the impact of the new payment system due to the COVID-19 pandemic.

“The roll-out of the PDPM in October 2019 followed quickly by the COVID-19 pandemic presents challenges to understanding the extent to which increases in payment to skilled nursing facilities [SNFs] are due to the changes in the payment system versus changes in the patient populations served during the COVID-19 pandemic,” Avalere’s report said.

“Given the confounding effects of the pandemic and the new payment system, it is important to collect more data before evaluating the transition to the PDPM.”

The study comes at a time federal regulators are considering possible adjustments to the PDPM budget neutrality factor, which the report said are likely skewed by the impact of the pandemic on nursing home population shifts. A proposed adjustment from the Centers for Medicare & Medicaid Services (CMS) would reduce PDPM payments to SNFs.

In reaction to the report, Mark Parkinson, president and chief executive officer of the American Health Care Association/National Center for Assisted Living (AHCA/NCAL), said, “Without sufficient data prior to COVID-19, now is not the time to introduce another change to PDPM. Nursing home providers need reimbursement stability so they can remain focused on resident safety and quality care as they attempt to recover from the pandemic.”   

As background, Avalere noted that Fiscal Year (FY) 2020 was the first year of the new PDPM that CMS developed for SNFs. CMS designed PDPM to be budget neutral relative to payments under the previous Resource Utilization Groups Version IV (RUG-IV) payment system, report authors said.

“To maintain budget neutrality, any observed increases in payment under PDPM in FY 2020 are subject to a downward adjustment in future rates. In its assessment of budget neutrality, CMS estimated FY 2020 RUG-IV payments to be 5.3 percent higher than FY 2020 PDPM payments,” the report said.

“After removing patients with a COVID-19 diagnosis on a SNF claim, CMS found that the difference was 5.0 percent, attributing the 0.3 percent difference to increased spending to treat COVID-19 patients.”

In its study, Avalere conducted an analysis to evaluate the comprehensive impact of the COVID-19 pandemic on SNF patients. Avalere used the Minimum Data Set (MDS) to analyze the percentage of patients with a respiratory diagnosis treated in SNFs in FY 2019 versus FY 2020.

Avalere’s analyses also examined changes in patient case-mix by month to determine how COVID-19 may have impacted payments for SNF care over the course of the pandemic. This month-by-month analysis also allows for an understanding of how government-mandated changes to patient management and SNF operations may have affected Medicare payments for SNF care for COVID-19 and non-COVID-19 SNF patients.

From this examination, Avalere found that March 2020 marked the start of the COVID-19 pandemic in terms of the larger impact on the health care system, Avalere’s analysis of MDS assessment items for respiratory diagnoses (MDS Items I6200 and I6300) found a higher proportion of patients with respiratory diagnoses throughout FY 2020 relative to FY 2018 and FY 2019.

Guidance from CMS on COVID-19 diagnosis coding was not available to SNFs until March 2020, but researchers said respiratory diagnoses in SNFs were significantly higher in all of FY 2020 compared to prior years.

“While several factors may contribute to the higher rates of respiratory illness, it is conceivable that this sharp increase was driven in part by COVID-19 cases before CMS instituted a formal COVID-19 diagnosis code and by undiagnosed cases throughout the year,” the report said.

This finding suggests that CMS’ claims-based approach using the COVID-19 diagnosis code may not have adequately captured the COVID-19 case volumes over the course of the pandemic, Avalere said.

In addition to looking at the respiratory diagnosis items on MDS, Avalere also examined the ICD-10 diagnosis coding on MDS assessments and found that 10.3 percent of patients treated in SNFs had a diagnosis for COVID-19 over the course of FY 2020, with the highest number of cases occurring in April and May 2020.

Read the full report at COVID-19 Pandemic’s Considerable Impact on Skilled Nursing Facilities | Avalere Health.