New Skilled Nursing Payment Plan Shows CMS Listened to Providers

The Centers for Medicare & Medicaid Services (CMS) shook the skilled nursing world last week by rolling out a proposal for a new payment model, replacing the structure that the industry had been anticipating for a year.

But several experts say that operators should look at the changes as positive updates made with providers in mind, and not a wholesale upheaval of the way they get paid.

CMS last Friday announced the Patient-Driven Payment Model (PDPM), which the agency framed as a slimmed-down version of the newly abandoned Resident Classification System, Version I (RCS-I). In essence, according to CMS, PDPM would keep RCS-I’s emphasis on quality and outcomes over quantity, while reducing the paperwork burden on providers — to the tune of a $2 billion savings over the coming decade.


The new rule represents a rebranding of RCS-I, which was initially introduced last spring with a lengthy stakeholder comment period. While most observers stressed that it’s still early to make sweeping conclusions about the major takeaways from PDPM, early returns seem to show that CMS gave the industry what it wanted.

“It appears as if CMS has listened very carefully to the feedback on the proposed final rule … and they’ve returned back to the industry what appears to be a sound proposal to better capture patients’ clinical characteristics, and pay for appropriate nursing and medical care,” Colleen O’Rourke, senior vice president of network and clinical solutions at care transitions company naviHealth, told SNN.

Like RCS-I before it, PDPM is subject to an open comment period from operators and the public, with a deadline of June 26 to submit a response.


Mike Cheek, senior vice president of reimbursement policy at the American Health Care Association, said it’s better to think of PDPM as RCS-II, and not a completely new way of paying for skilled care.

“I think that we view it as modernizing our SNF prospective payment system, as a step forward. I think that everyone recognizes that there are problems with the Resource Utilization Group,” Cheek said, referencing the current system — also known as RUG — that both RCS-I and PDPM were designed to replace.

In essence, the proposals were intended to shift Medicare payments away from volume, discouraging providers from fattening up on therapy hours and instead incentivizing group sessions and general quality improvements. After listening to input from providers on the original scheme, CMS slashed many of the reporting requirements and simplified the payment groups, reducing their number by 80%.

“To put things in perspective, it will only take a few hours to retrofit my RCS training material to PDPM,” Marc Zimmet, president of consulting firm Zimmet Healthcare Services Group, LLC, told SNN.

O’Rourke echoed those sentiments, though she noted that facilities’ preparation levels for RCS-I — and now, by extension, PDPM — have been “a mixed bag.”

“If they’ve already started that body of work, I think they just continue down that path,” she said. “I think that if SNFs didn’t see RCS-I actually evolving into a payment reform, then they’ve got 17 months — which is a short period of time — to sort of get things in order.”

Despite the emphasis on simplicity, Zimmet emphasized that the new model will require a new approach.

“The reduction of possible composite scores is overblown — we went from 139,000 to 29,000, many of which are mutually exclusive,” he said. “[It] may as well be 1 million, as all the moving parts must still be effectively managed.”

So even though the new system represents improvement, the clock is ticking for providers to develop plans before the proposal potentially takes effect on October 1, 2019,

“The bottom line: This is not a funding change,” Zimmet said. “PDPM is a new revenue distribution system that will require management and logic.”

Written by Alex Spanko

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