Focus on PDPM Could Distract Skilled Nursing Operators from Current Risks

With a new payment model just eight months away, the skilled nursing industry has trained a laser-guided focus on maximizing patient outcomes and reimbursements under the system.

But smart providers would be wise not to let the Patient-Driven Payment Model (PDPM) distract them from the pressing issues facing them between now and October 1.

“Any time you have something that’s going to take time, training, attention, focus. and money, it really means that attention may be diverted from the day-to-day care that is being provided to the residents, which then exposes facilities to … compliance issues, regulatory issues in terms of survey, litigation,” Alan Schabes, partner at the law firm of Benesch, Friedlander, Coplan & Aronoff, said during a Thursday discussion at the American Conference Institute’s annual forum on litigation, risk management, and compliance issues in the long-term health care space in Miami.


What sets the implementation of PDPM apart from previous changes, Schabes noted, is the lack of a transition period: On September 30, skilled nursing facilities will still bill for services under the old Resource Utilization Group, Version IV (RUG-IV) system, then start from scratch under PDPM the following day.

“There will be a hard cliff, a hard dive off of the cliff,” Schabes said.

That makes the financial stakes for providers even higher than during previous payment overhauls, and the industry has responded with a full-court press of training, data analytics, and long-term planning to keep the reimbursements flowing starting in fiscal 2020.


“What it means for 2019 is that this will be a huge vacuum cleaner of time, of training, of focus, of attention for the administrative side of it, for the senior executives, for professional staff, and for nursing staff,” Schabes said.

Still, providers have to operate in the RUG-based world for most of the year, and allowing that vacuum to distract from the day-to-day operations of a facility could lead to serious problems before and after the transition takes place. In the near-term, that could mean declines in care quality and a lack of focus on the key reimbursement drivers that exist today, such as preventing hospital readmissions and accurate RUG scoring.

Regulators, lawyers will compare and contrast

In addition, the hard stop doesn’t mean that the last eight months of the RUG world will simply disappear from the record once PDPM takes effect. Multiple industry voices have warned that the Centers for Medicare & Medicaid Services (CMS) will be closely monitoring the shifts in care volume and service types in the immediate wake of the implementation — and comparing them to the services and outcomes achieved in the waning days of RUGs.

As it’s currently designed, PDPM is a budget-neutral program, meaning the total reimbursements to nursing homes will not change from the RUG system. But if regulators see any substantial reductions in outcomes or a significant boost in dollars spent, the consensus goes, CMS will likely respond with Medicare rate cuts.

But federal officials won’t be the only ones watching the before-and-after picture develop: Plaintiffs’ attorneys will likely get into the game, Schabes predicted, opening nursing homes up to significant legal headaches if savvy lawyers pick up on any major fall-offs in care quality between the RUG and PDPM days.

“Unless there’s going to be some sort of transition, or some crosswalk, from one to the other — so that there’s not a complete overhaul of incentives — I think you’re putting yourself in some jeopardy,” he said.

That crosswalk should take the form of solid monitoring and auditing processes both before and after the transition, according to Beth Lori, compliance director at senior living and continuing care retirement community (CCRC) chain Life Care Services. That way, providers can easily root out any significant changes that could open them up to potential litigation or regulatory headaches — including unintentional billing errors, which Lori mentioned could arise during the RUG-to-PDPM shift.

There’s another tempting distraction for providers feeling the PDPM pressure: the ongoing government shutdown, which on Thursday entered its 34th day. While Medicare and Medicaid payments have continued without interruption, many of the workers in charge of PDPM educational efforts are stranded at home without pay — and not producing the kinds of materials on which many providers rely to bring their staffs up to speed.

Still, while Schabes said that many of his clients have asked if the shutdown might affect the government’s timeline for PDPM, he only has one answer.

“You assume that it’s going to be October 1 until such time as they tell you it will not,” he said.

More bankruptcies ahead

During the wide-ranging panel discussion about the top concerns for the industry in 2019, Schabes focused on the wave of bankruptcies and chain breakups that hit the skilled nursing space over the year, from HCR ManorCare to Senior Care Centers to Skyline — the latter of which he described as a “debacle” after its management seemingly disappeared overnight.

The headwinds that blew those providers off the map in 2018 aren’t going away in 2019, he emphasized, with potentially crippling rent escalators at certain properties owned by real estate investment trusts (REITs), low census, and persistent staffing pressures only likely to continue in the year ahead.

“I am very concerned. I’m really concerned about 2019. I see a lot of systems that are highly over-leveraged from a debt standpoint,” he said.

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