Skilled Nursing Providers Have One Shot at Payment Success Under PDPM

Of all the changes coming to the skilled nursing industry when a new payment model takes effect next fall, the most pressing may be one of the most basic: Starting in October 2019, providers will have a single opportunity to set themselves up for financial success with a patient’s initial assessment.

The Patient-Driven Payment Model, set to take effect in October 2019, will shift payment incentives away from billable therapy hours and toward general treatment of the patients’ overall health issues, with the Centers for Medicare & Medicaid Services (CMS) specifically citing a desire to reduce the possibility of fraud among providers.

Under the new system, all reimbursements will be based on a patient’s initial assessment for the duration of his or her stay in a skilled nursing facility, with further revisions not having a significant impact in the amount of money that a provider can capture for the course of the episode.


While clinical staff can shift a resident into a different case-mix group by conducting a Interim Payment Assessment (IPA), according to an analysis from KeyBanc Capital Markets vice president Erika Haanpaa, it still won’t be enough to make up for errors or omissions committed during that first encounter.

“Notably, however, a change based on the IPA would not reset the variable per diem adjustment schedule, which underscores the importance of ensuring the patient’s condition is accurately reflected on the initial assessment,” Haanpaa wrote in commentary for Cain Brothers, an health care-focused investment banking subsidiary of KeyBanc Capital Markets.

This could prove difficult for nursing home staffers who are more accustomed to assessing a patient through the lens of the old Resource Utilization Group, Version IV (RUG-IV) model and not necessarily his or her specific diagnoses.


“Truthfully, people haven’t coded to an assessment that gathers everything,” Sheryl Buchholtz-Rosenfeld, director of clinical operations at consulting firm Zimmet Healthcare Services Group, told Skilled Nursing News. “They’ve coded to a RUG payment. And in coding to a RUG payment, they’re missing a lot of other what we call drivers — more important information about the total care.”

This shift in assessment priorities makes sense given CMS’s underlying goal of more closely linking SNF payments with resident needs — and, as some observers have predicted, eventually patient outcomes. Success under PDPM could thus rest on providers taking on more medically complex patients or those with specialized needs, such as residents who require ventilator or cardiac care. But providers also need to keep an eye out for certain treatments or services that are now “reimbursement-sensitive” in PDPM where they weren’t before, such as an end-stage renal patient who requires IV services and other treatments that will now factor into a building’s overall Medicare income.

Tick tock

Multiple analysts, including Haanpaa, have pointed out another reason why a SNF’s upfront interaction with a patient will take on even greater importance starting next year: The first days of a resident’s stay will be the most lucrative.

“PDPM aims to more accurately compensate for increased services required earlier in a patient’s stay with a variable adjustment for certain of the components,” Haanpaa wrote. “The payments for the physical therapy and occupational therapy components will be adjusted downward after the 20th day, and the payments for the non-therapy ancillary component will be reduced after the third day.”

Coupled with the lack of interim assessments, this means SNFs have a single opportunity to accurately set their reimbursement potential as accurately as possible under the PDPM system, with the earning potential only dropping with each passing day.

“The feds were thinking: What’s bringing you into the nursing facility post-acute care?” Buchholz-Rosenfeld said. “Why are you going there 24/7? That one shot is: Give us all the diagnoses, give us all the drivers.”

To prepare for the changes, she recommends that providers focus on training their staffs now.

“Facilities need to start initial training and planning for collecting new or different information, including looking at admission info processes and staff competency for understanding and implementation,” Buchholz-Rosenfeld said.

Accounting and consulting firm Plante Moran, for instance, suggested that providers encourage — or even incentivize — an employee to receive a formal coding certification from the American Academy of Professional Coders, specifically the Certified Inpatient Coder credential.

While CMS did not specify a continuing education program that’s most closely aligned with PDPM, the CIC certification focuses on critical ICD-10 codes used in both skilled nursing facilities and hospitals, which Plante Moran identified as a key skill going forward. The credentialing process can take upwards of nine months, the consultancy cautioned, so operators need to act soon in order to have certified coders on staff when PDPM takes effect.

The news isn’t all doom and gloom for skilled nursing facilities, of course. Multiple industry voices have praised PDPM as a welcome shift toward reimbursements that more accurately reflect the work that SNFs do on a daily basis, and the new model eliminates several rounds of follow-up assessments that are mandatory under the current system — part of why CMS estimates that PDPM will save providers a total of $2 billion in reporting costs over the next decade.

“On a positive note, by focusing on the initial assessment and making the IPA optional, the new model significantly reduces the number of required assessments,” Haanpaa noted.

Written by Alex Spanko

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