For years, the Centers for Medicare & Medicaid Services (CMS) has been developing a new prospective payment system (PPS) to replace the existing Resource Utilization Group (RUGs) PPS. CMS formally finalized the new system last July; it goes into effect Oct. 1, 2019.

Called the Patient-Driven Payment Model (PDPM), the new PPS is a significant departure from RUGs and, in many ways, a welcome one.

Move Away from Minutes

Almost since its inception, the RUGs payment system has struggled with a payment bias toward the delivery of therapy. In a 2002 evaluation of the RUGs model, research firm ABT Associates noted that the provision of therapy services would increase among participating facilities, “due to the incentive to provide enough minutes of therapy to qualify Medicare beneficiaries for higher-paying RUG groups.”

As with overarching Medicare payment policy goals, PDPM is intended to move away from service-based metrics for purposes of payment, which in RUGs is the number of therapy minutes delivered.

Under PDPM, therapy minutes have no direct relationship with payment at all. Rather, payment is driven by an array of patient characteristics. These include diagnostic information collected via ICD-10 diagnosis codes assigned by skilled nursing facility (SNF) clinicians, medical record information, functional status using Section GG of the Minimum Data Set (MDS), and a new cognitive assessment scale.

Patient characteristics are used to assign patients to the appropriate case mix group (CMG) by PDPM direct service components (physical therapy, occupational therapy, speech language pathology, nursing, and non-therapy ancillaries).

CMS believes PDPM provides a more holistic approach to patient care by separately adjusting each component, with a particular emphasis on the nursing component and the non-therapy ancillary component.

In short, PDPM is intended to refocus SNF care to medically complex patients and away from therapy. PDPM also is intended to align with the IMPACT Act Quality Reporting Program to more accurately reflect the impacts of a more holistic approach to care.

Need for Accurate Reporting

Under PDPM, the number of MDS items impacting payment is 161, up from the 20 MDS items that drove assignment to a rehab RUG.

Accurate coding under PDPM is critical, particularly during the Five-Day Assessment window due to the expanded importance of MDS items.

In the Five-Day Assessment, patients are assigned to CMGs for each of the five service-related components. Correct assignment is particularly critical under PDPM because payments under three components—physical therapy, occupational therapy, and non-therapy ancillaries—decline over the course of the stay using a CMS-developed schedule.

While a patient may be re-assigned to a different CMG following the initial Five-Day Assessment, the declining payment schedule does not return to day one of a stay. So, if the assigned CMG and related case mix index result in a rate that’s too low, the declining payment schedule could become problematic later in the stay as the payments continue to decline.

PDPM frees SNFs from counting therapy minutes and a largely outdated payment system. However, with change comes an array of challenges.

With the Oct. 1, 2019, implementation date rapidly approaching, SNFs should be well underway with four
key PDPM Core Competencies© developed by the American Health Care Association:
  • Educate yourself about the new system. SNFs should be assessing how their facilities will position to deliver care to more medically complex patients and shift away from therapy;
  • Develop accurate diagnostic and MDS coding capabilities—ICD-10 Diagnosis codes had little impact on payment under RUGs, while under PDPM, ICD-10 and MDS coding become critical to payment;
  • Evaluate and strengthen your ability to manage complex patients. Developing clinical care pathways for medically complex patients is at the core of PDPM success; and
  • Align resources. Alignment of resources inside the SNF is key. Clinicians, MDS coordinators, and billing staff will need to communicate far more closely than in the past. Additionally, resources and relationships must be revisited, including information technology and therapy contractors.
Mike Cheek is senior vice president, reimbursement policy, for the American Health Care Association. PDPM Update is a new Provider monthly feature that will bring more details about the new PPS system as they are released by CMS over the coming year.