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PDPM (Patient-Driven Payment Model): Outcomes Matter!

Effective October 1, 2019, the regulatory shift to the Patient-Driven Payment Model (PDPM) represents a critical step in the journey towards value-based care for Skilled Nursing Facilities (SNFs). PDPM is a new case-mix centric model which focuses on the patient’s condition and resulting care needs rather than on the volume of care provided to determine Medicare Part A payment. This shifts payments from a Fee-For-Service (FFS) to a Fee-For-Value (FFV) payment model: ONLY outcomes matter!

Here are some of the ways that reimbursements will be affected under PDPM:

  1. Payment is determined through the combination of six payment components. Five of the components are case-mix adjusted, including physical therapy (PT), occupational therapy (OT), speech-language pathology (SLP), the non-therapy ancillary (NTA) services, and nursing. Additionally, there is a non-case-mix adjusted component to cover the utilization of SNF resources that do not vary according to patient characteristics.
  2. The per-diem payment under PDPM is determined by two primary factors, base rates that correspond to each of the six payment components (Item 1 above) and case-mix index (CMI) values that correspond to each classification group within the case-mix adjusted payment components. The payment for each of the case-mix adjusted components is calculated by multiplying the component CMI for the resident’s classification group by the component base rate, then by the specific day in the Variable Per Diem (VPD) adjustment schedule, when applicable. (For details on VPD schedule: see CMS.) These payments are added together along with the non-case-mix component payment rate to create a resident’s total SNF PPS per diem rate under the PDPM, which is then wage-adjusted in the same manner as rates under RUG-IV.
  3. Therapy minutes are no longer relevant to assess reimbursement. Rates are primarily determined by clinical and diagnosis information instead of minutes. The diagnosis entered in I0020B will define the Clinical Category, therefore, accurate MDS and ICD-10 coding will become critical.
  4. ICD-10 coding can “make or break” the resident’s primary clinical category, and comorbidity score, which would significantly impact several of the case mix components: Timely and accurate hospital discharge information is critical, including prior surgery information and hospital discharge diagnosis.
  5. Section GG of the MDS 3.0 becomes important for payments under PDPM. In the past, some facilities delegated this section to therapy caregivers. Under PDPM, Section GG drives PT and OT and nursing which affect reimbursement.
  6. NTA has been separated as an independent component, and NTA classification is determined by the presence of certain conditions or the use of certain extensive services that were found to be correlated with increases in NTA costs for SNF patients. CMS identified a list of 50 conditions and expanded services that were associated with increases in NTA costs. The presence of these conditions and extensive services is reported by providers on the MDS 3.0, with some of these conditions being identified by ICD-10-CM codes that are coded in Item I0020B of the MDS.
  7. Since PT, OT and NTA are reduced for longer lengths-of-stay (Nursing and SLP stay flat), incentives are created for shorter lengths-of-stay.
  8. Documentation is simplified with the reduction in MDSs required. The 100-day MDS schedule under RUGS-IV is replaced by a 5-day assessment in PDPM.

The path to PDPM success requires a wholistic approach that includes a focus on MDS assessments, accuracy of ICD-10 classification, clinical documentation, adequate reporting and analytics tools, solid process for intake and transitions of care (e.g., timely discharge diagnosis info) and, of course, billing. It is critical that SNFs choose the right partners for this change. At MatrixCare, we have invested several years of development into each component that is critical for the move to PDPM and we welcome the opportunity to partner with SNFs as they adapt their business model to succeed under value-based care.

Krishna Bala, Ph. D.

Krishna Bala, Ph.D. is AVP of Software Development for MatrixCare. He leads the development of several key aspects of our SaaS electronic healthcare records (EHR) platform for out-of-hospital care. Previously, he served as Sr. VP of Engineering at SigmaCare which was acquired by MatrixCare in 2017. He is a seasoned technical leader with more than 20 years of strong execution skills in startups and larger companies. Dr. Bala received a Ph.D. from Columbia University for his work on Routing Algorithms. He is widely published in technical journals, is the co-author of a graduate-level textbook and has 9 awarded patents. He is a fellow of the OSA.