As PDPM Nears, Providers Can’t Rely on Sunny CMS Projections to Succeed

As the implementation date draws nearer for the overhaul of the Medicare reimbursement system, some providers have found comfort in government projections about their revenue under the new model.

But that comfort might be misplaced, according to a webinar held Wednesday by Minneapolis.-based consulting and management firm Health Dimensions Group.

The Centers for Medicare & Medicaid Services (CMS) has issued projections for how the Patient-Driven Payment Model (PDPM) will impact providers and released various tools to give operators an idea of how the new system will affect them.


But SNFs can’t assume a good outcome even if those tools give a rosy picture of the future.

“CMS revenue impacts are projections,” Brian Ellsworth, HDG vice president of public policy and payment transformation, said on the webinar. “As we’ve been out speaking with providers, we’ve occasionally encountered the mentality of: ‘I’ve looked at my CMS projections and they’re positive, or break-even, and I don’t have anything to worry about.'”

This could set up providers for some rude awakenings, Ellsworth said. For one thing, the projections are estimates, and employ proxies for some parts of the calculations that weren’t available in fiscal 2017, the latest year used for data in the PDPM technical report. In addition, downward payment adjustments could occur for various reasons, including the fact that the program — which will replace the current Resource Utilization Group (RUG) system — is designed to be budget-neutral; in other words, CMS will not spend any more or less money on skilled nursing care under PDPM than it does currently.


“People need to understand these payments are not pegged to costs or to some kind of fixed standard,” Ellsworth said on the webinar. “They’re pegged to what otherwise has been spent under RUGs, and that is a standard that can change and evolve. And CMS has been playing their cards very close to the vest in terms of how that will be revised in the future.”

The point, he stressed, is that projections can be a starting point for providers, but they cannot be where SNFs end their thinking on the new model.

There are three main opportunities that PDPM opens up for providers, Darrin Hull, HDG’s executive vice president of consulting, said on the webinar: the ability to manage therapy costs, the opportunity to develop new clinical service lines, and the potential for alignment with value-based payers.

But all come with perils. SNFs and rehab providers alike have been wrestling with how to navigate the new model, and how the relationship with rehab is going to change. Revenue and costs are going to shift as PDPM unfolds, Hull said, and the workforce challenges throughout the skilled nursing industry aren’t going to go away with PDPM.

Ellsworth also noted that the shift in payment comes as value-based reimbursements become an ever-greater part of health care.

“PDPM is part of a larger policy context of refining payment systems to drive value,” he said, highlighting how the Medicare Shared Savings Program accountable care organizations (ACOs) and Bundled Payments for Care Improvement Advanced (BPCI Advanced) are at “critical junctures at this point and time.”

While these models had traditionally allowed participants to test out the system without fear of losing reimbursements, new and existing Medicare ACOs are on quicker paths to risk now that CMS has finalized the Pathways to Success reforms — and for BPCI Advanced, the six-month, no-risk trial periods ends in March of this year.

In this larger context, it’s perhaps not surprising that PDPM will have ripple effects. The new model is eventually going to impact Medicare Advantage (MA) and Medicaid, Ellsworth noted. MA plans have much more flexibility in terms of how they pay for services, making the direct impact harder to foresee, but for Medicaid, the link is clear: Several state Medicaid programs make use of the RUG system, Ellsworth said, and federal support for RUG payment codes is going to end in 2020.

“There will be a variety of decisions that Medicaid programs will have to make over time, especially if their current payments are based off the RUG system,” he said.

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