Proposed payment rule PDPM: What SNFs need to know

Jun 01, 2018
The Bottom Line

The following post has been edited and republished with permission from the author, Reginald M. Hislop III, a healthcare executive, consultant, author, and recognized thought leader in the field of healthcare, specialized healthcare, postacute care, and health policy. Find his blog at

The Patient-Driven Payment Model (PDPM), as proposed, is designed to replace the current SNF payment methodology known as RUG-IV. Unless date changes, etc. are made by CMS post commentary review, the effective date of the change (from resource utilization groups to PDPM) is October 1, 2019. PDPM as an outgrowth of the initially proposed resident classification system (RCS) and received commentary is a simplified payment model designed to be more holistic in patient assessment, capture more clinical complexity, eliminate or greatly reduce the therapy focus by eliminating the minute levels for categorization, and simplifying the assessment process and schedule (reducing to three possible assessments/MDS tasks). Below is a summary of PDPM core attributes/features as proposed. Click here to access the PDPM Calculation Worksheet for SNFs that provides additional details beyond the reference points below.

  • PDPM uses five, case-mix adjusted components for classification and thus, payment: Physical therapy (PT), occupational therapy (OT), speech, non-therapy ancillary, and nursing.
  • For each of these components, there are separate groups which a resident may be assigned, based on MDS data. For example, there are 16 PT groups, 16 OT groups, 12 Speech groups, 6 non-therapy ancillary groups and 25 nursing groups.
  • Each resident, by assessment, is classified into one of the group elements within the component categories. This means that every resident falls into a group within the five case-mix components of PT, OT, speech, non-therapy ancillary and nursing.
  • Each separate case-mix component has its own case-mix adjusted indexes and corresponding per diem rates.
  • Three of the components, PT, OT and non-therapy ancillary, have variable per diem features that allow for changes in rates due to changing patient needs during the course of the stay.
  • The full per diem rate is calculated by adding the PT, OT, and non-therapy ancillary rates (variable) to the non-adjusting or non-variable nursing and speech components.
  • Therapy utilization may include group and/or concurrent treatment sessions provided no more than 25% of the total therapy utilization (by minutes) is classified as group or concurrent.
  • PT, OT, and speech classification by group within their respective components do not include any function of “time.” The sole denominator of how much/little therapy a resident receives is the necessity determined by the assessment process and by the clinical judgment of the care team.  In this regard, the minimum and maximum levels are based on resident need, not on a predetermined category (RUG level).
  • Diagnoses codes from the hospital on admission (via ICD-10) are important and accuracy on the initial MDS (admission) are imperative.
  • Functional measures for therapy (PT, OT) are derived from Section GG vs. Section G, as provided via RCS-1.
  • The non-therapy ancillary component allows facilities to capture additional acuity elements and thus payment, for additional existing comorbidities (e.g., pressure ulcers, COPD, morbid obesity, etc.) plus a modifier for parenteral/IV feeding.
  • There are only three Medicare/payment assessments (MDS) required or predicated starting in October of 2019:
    • Admission
    • Change of condition/payment adjustment
    • Discharge.
    • NOTE: All other required MDS submissions for other purposes such as QRP, VBP, Quarterly, etc. remain unchanged.

For SNFs, the takeaways are pretty straightforward. First, clinical complexity appears to be the focus of increased payment opportunity. Second, therapies are going to change fairly dramatically: Utilization does not involve minutes, and more is better when clinically appropriate, but less is always relevant. The paperwork via MDS submissions has definitely lessened, but assessment performance will require more accuracy and clinical judgment. MDS coordinators who are exceptional clinicians and can educate and drive a team of caregivers will be prized as never before. RUG-style categorization is over, so the focus is not on maximizing certain types of care and thus payment, but on being clinically savvy, delivering higher-quality care, and being efficient. Those SNFs that have been trending in this direction, caring for clinically complex patients, embracing the use of nursing RUGs, and being on the ball in terms of their assessments and QMs are likely to see some real benefits via the PDPM system.

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