Providers Must Target Rehab Contracts, Cash Flows Now Ahead of PDPM

As skilled nursing providers start preparing for the new Medicare payment model, they need to zero in on how much money they’re making now on the various services they provide.

Specifically, they need to brush up on their ICD-10 codes, which will play a key part in the setting of their reimbursement rate, as well as their rehab contracts.

Above all, they can’t rely just on the Centers for Medicare & Medicaid Services’ (CMS) projections on how well they’ll do under the new Patient-Driven Payment Model (PDPM).


“The information you receive from CMS is based on a point and time, and based on how the population changes between now and [October 1, 2019], you’re going to have different outcomes,” Cory Rutledge, managing principal of senior living at the professional services firm CliftonLarsonAllen, said during a panel discussion at LeadingAge’s annual conference and expo in Philadelphia on Monday.

ICD-10 matters now

Under the new payment model, SNFs have to get a handle on their ICD-10 coding, Judy Wilhide Brandt, principal at Wilhide Consulting, said at the conference.


The 10th version of the International Statistical Classification of Diseases and Related Health Problems (ICD-10) is used, along with other patient characteristics, as the basis for patient classification in the finalized PDPM case-mix model. As a result, SNFs have to make sure they have the right coding capabilities and personnel.

One of the biggest challenges for SNFs will be making sure the ICD-10 codes are accurate.

“We’ve never had to tighten up ICD-10 coding because it’s never really mattered,” Wilhide Brandt said. “We’ve done the best we can. We’ve gone to the two-day seminars, we’ve shuffled through the book, Google has been our best friend, and it’s never mattered. Because it’s not how we got paid; it’s how doctors get paid, and it’s how hospitals get paid. [But] it’s now how we get paid.”

Greg Krzmarzick, a reimbursement consultant with the Sioux Falls, S.D.-based Evangelical Lutheran Good Samaritan Society, Sioux Falls, also emphasized the importance of ICD-10. In assessing its readiness for PDPM, Good Samaritan — which is the largest non-profit senior services provider in the U.S., with 158 SNFs — put together training materials its employees could implement right away that would prepare them for the transition to the new payment system.

The four topics Good Samaritan covered in this training, which covered all its locations, were Minimum Data Set (MDS) coding accuracy, clinical capabilities, ICD-10 training, and therapy programs. It also has an ICD-10 coding course that employees must complete upon hire, and conducts audits on the accuracy of ICD-10 coding, which have been used to come up with other training ideas.

Good Samaritan also examined all of the conditions listed on the PDPM’s non-therapy ancillary services list and matched them to referrals that it had taken, referrals that it was more cautious about taking, and referrals that it had turned down. Those referrals were coded green, yellow, and red, respectively.

“For the red, we were able to look at: What are the barriers, and what are we able to do to make those green over the next 12 months before PDPM kicks in?” Krzmarzick said.

Reviewing rehab contracts

One of the earliest takeaways from the initial PDPM announcements was that the rehabilitation business model would change substantially. Though therapy providers do agree that PDPM is an improvement over old models, PDPM eliminates therapy minutes as a driver of reimbursement. And rehab providers aren’t the only ones who have to adjust to this sea change; SNFs must take a look at their third-party rehab contracts, the panelists agreed.

“Those per-minute [rehab] contracts will probably not make sense under PDPM,” Rutledge said. “If your therapy provider has not come to contract renegotiation, they will soon, and they have a lot more data than you do. So understanding the nuts and bolts of that … that’s an area that we’re talking to clients about a lot.”

Good Samaritan is currently “grappling” with its rehab contracts and what to do about them under PDPM; the non-profit has 36 different therapy contracts across the U.S., Krzmarzick said.

“Do we keep the 36 different providers that we have across the country, or do we do therapy contract consolidation?” he asked rhetorically. “Or do we build in-house therapy? This question right here is something that is extremely difficult because of our size.”

When skilled providers go into these negotiations with their third-party rehab providers, it’s essential that they understand exactly how the rehab provided affects their bottom line so they have some ammunition to work with, Rutledge stressed.

“One thing we’re recommending to organizations is to take a sample of 20 individuals, see the therapy minutes they’ve given, and dig in and understand what was the therapy component of your reimbursement and how much did you pay your therapy provider,” he said.

And though SNFs need to start these conversations as soon as possible, they shouldn’t let themselves jump the gun.

“There’s no reason to be signing any contracts early, and if your contractor wants you to sign it early, I wouldn’t do that,” Wilhide Brandt said. “The thing with the rehab contractors is they have built their business on their being a revenue driver. Now they are a cost center.”

Written by Maggie Flynn

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