Payments Will Rise for Most Providers Under New Model, But Some Could Suffer

Most skilled nursing facilities can expect a financial gain under the new Patient Driven Payment Model (PDPM), but some are going to have make adjustments to avoid taking a significant hit as incentives shift.

“SNFs with a heavy focus on ultra-high therapy and an ultra-long length of stay (LOS) will really need to take a look at their clinical and operational focus and really begin to kind of rethink things,” Brian Ellsworth, vice president of public policy and payment transformation at the consulting firm Health Dimensions Group (HDG), said on a webinar held Wednesday.

The Centers for Medicare & Medicaid Services (CMS) introduced the new proposed payment model for SNF reimbursements in April; if it becomes final, the rule will take effect Oct. 1, 2019, in time for the government’s fiscal 2020.


Comments are currently being accepted on the Federal Register until June 26.

Changing provider behavior

PDPM is budget-neutral before any assumptions about behavior change, Ellsworth said, meaning that if SNFs behave exactly as they have under the current Resident Utilization Group — Version 4 (RUG-IV), payments under the new system would equal payments under RUG-IV.


“That really is where CMS figures they’ll be achieving savings over time, is in reaction to changes in incentives,” he said.

Those shifting incentives include aligning the payment system more with patient characteristics, a move that’s expected to make medically complex patients more attractive to SNFs while removing therapy minutes as a driver of reimbursement.

Health Dimensions Group, which is based in Minneapolis, used two case studies to show how this might play out.

In one, a 75-year-old male with several medical conditions and a 60-day LOS will draw a reimbursement of more than $30,000 under the PDPM system, compared with just below $20,000 under the RUG system. This included the 2% per week reduction after day 20 for the physical and occupational therapy components, Ellsworth noted — so even with those, PDPM offers a significant increase.

On the other hand, a therapy case study showed that PDPM would pay about $10,000 for a patient with minimal comorbidities, compared with either $11,350 for a patient in RUGs’ Ultra therapy category or $9,702 in the Very High category.

As a result, the payment changes projected under PDPM vary wildly. A provider with almost 60% of its stays at the Rehab Ultra category will see an 8.4% drop in payments, while a facility that has 35.4% of its LOS between one and 15 days will see a payment increase of 13.7%, Health Dimensions Group asserted, citing data from CMS’ PDPM technical report.

Most providers will win

CMS analyzed data for 13,769 providers, 8,101 of which are expected to gain from the change to PDPM, according to the agency. The solid majority of providers will see either gains or losses in the $1-$49,999 range, but seven providers are expected to see revenue gains between $1 million and $2 million, while 45 are expected to see losses between that same range.

New York is expected to see a particular hit; the Empire State has 3.7% of the SNFs in the U.S., and 4.7% of its SNFs are expected to lose money in the switch to PDPM. This means it has 15.2% of negative impacted providers’ total losses. This means New York providers account for 15.2% of the total losses associated with PDPM.

To gain, SNFs will have to carefully consider how to adjust operations in several ways, according to Darrin Hull, senior vice president of consulting at HDG. They’ll have to consider how to provide therapy, make the pivot to more medically complex care, and reduce the silos between therapy and nursing, among other strategies.

“Providers will need to work toward standardizing a variety of approaches to address what we expect will be an increase in medically complex patients,” Hull said.

Written by Maggie Flynn

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