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CMS's new Patient-Driven Payment Model (PDPM): Proactive planning steps for SNFs

July 31, 2018 Article 3 min read
Denise Leonard
The new CMS Patient-Driven Payment Model (PDPM) is expected to replace the current Resource Utilization Group, Version IV Model (RUGs-IV) on October 1, 2019. Start planning now. A few simple steps can give you a head start.

A nurse checking on an elderly woman.

Skilled nursing facility (SNF) providers who have been anxiously awaiting the final rule for the new Patient-Driven Payment Model (PDPM), reimbursement methodology, which has just released, can start evaluating and planning the impact to their operations now. The Centers for Medicare & Medicaid Services’ (CMS) “proposed rule” is expected to replace the current Resource Utilization Group, Version IV Model (RUGs-IV) on Oct. 1, 2019.

PDPM is a SNF reimbursement system based on the framework of the proposed Resident Classification System, “RCS-1,” that aims to better align payments with the patient’s needs rather than the resources used. CMS believes that, while this new system maintains a budget-neutral funding based on the reduction in the number of minimum data set (MDS) assessments and change in therapy delivery (allowing concurrent and group therapy), providers will save $1.8 billion over 10 years. CMS has posted estimated rates for providers to their website using 2014 data, and one notable change is the objective to have Medicare rates taper off over the length of a resident’s stay. Specifics related to PDPM are included in the final rule to be released August 8th. In the meantime, SNF PDPM planning is essential, so we’ve outlined some additional background and steps providers can take now to prepare.

1) Get familiar with the driving forces behind the change

The primary reason behind a comprehensive change to SNF reimbursement for Medicare Part-A services is to more accurately align provider reimbursement with the many ways clinical care is delivered in a skilled nursing setting. Currently, under RUGs-IV, SNF reimbursement is closely tied to the amount (in minutes) of therapy that is provided to each resident. Given the higher reimbursement rates associated with therapy services, this relationship has the potential to incentivize SNFs to provide treatment beyond what’s necessary.

The proposed PDPM is meant to eliminate the incentives for excessive therapy by expanding the various rate components that are driving the per diem rates. Instead of a broad “therapy” rate component based on minutes of therapy provided under RUGs-IV, PDPM provides a separate rate component for physical therapy, occupational therapy, and speech-language pathology, which do not use therapy minutes as the primary driver for the associated reimbursement.

PDPM is also expected to expand the nursing component of the per diem rate to more accurately capture the clinical characteristics of the resident being served. Additionally, PDPM will add a case-mix adjusted, non-therapy ancillary component to the per diem rate calculation in order to allocate resources to providers caring for residents with comorbidities.

2) Understand what PDPM means for SNF providers and stakeholders

Now is the time to start preparing for change. Once the proposed rule is finalized, which is now expected to occur during the fall of 2018, payment models will be created and will be available to help providers crosswalk their current skilled population under RUGs-IV to the new patient-driven payment model. This process will help providers estimate and budget for the financial impact of the new payment model; however, financial models are only as good as the information put into them. Providers who are proactive in following these steps will be best suited to maximize reimbursement under the new patient driven payment model.

Before any changes occur, gain a thorough understanding of the therapy services and clinical characteristics of your current skilled population.

3) Review capabilities to serve your current skilled population and methods for assessing resident needs

Before any changes occur, gain a thorough understanding of the therapy services and clinical characteristics of your current skilled population. Identify any potential “over-delivery” of therapy services, and ensure you’re capturing all clinical characteristics in the resident assessment. Once you have an accurate picture of the services you’re currently providing, review the internal processes used to determine your resident assessments. Consult with those who are assessing needs in order to improve the process so that a comprehensive care plan can be implemented upon admission.

Have questions? The Plante Moran healthcare consulting team is available to help you prepare for and navigate the upcoming changes. Contact us today.

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