Facilities Thriving Under Current Model Poised to Take Biggest Hits Under PDPM

As skilled nursing providers prepare for a new Medicare reimbursement system, those with solid revenues under the current model may be in for the most severe declines going forward.

Operators that have mastered the current Resource Utilization Group (RUG) system tend to be those projected to see reimbursement declines under the new Patient-Driven Payment Model, according to an analysis by Plante Moran — while the so-called PDPM “winners” generally have lower RUG hauls.

It’s a reality that the advisory and consulting firm expressed bluntly in a webinar presentation earlier this week.


“Providers who are projected to do well under the RUG system are not projected to do well under PDPM,” Denise Gadomski, health care consulting partner at Plante Moran, said.

Specifically, the average RUG per diem rate for PDPM “losers” nationally is $558.38, according to Plante Moran’s data analysis. But under PDPM, their rate will drop to $529.59. Winners, by contrast, have an average RUG rate of $489.50 at present; under PDPM, their average rate will jump to $524.46.

One interesting wrinkle in the data is that government-operated facilities are expected to “perform the best under PDPM, with all states seeing a significantly higher percentage of winners,” according to Gadomski.


Specifically, 73% of government facilities will be winners nationally, while 100% of government facilities in Colorado are projected to see an increase in reimbursement.

Of non-profits nationally, 66% are projected to be winners, while 56% of for-profit providers nationally are projected to see a reimbursement increase.

In fact, for-profit providers nationally are expected to take a hit under the new model. Plante Moran projected an overall decline in reimbursement for for-profits of $139.14 million. Non-profits, meanwhile, are projected to get an increase of $95.36 million, while government providers will see a boost of $39.25 million.

What drives success or failure

PDPM features five rate components based on patient characteristics: physical therapy (PT), occupational therapy (OT), speech and language pathology (SLP), nursing, and non-therapy ancillary (NTA) services. One of the primary rate drivers under PDPM will be the NTA rate components, Gadomski said, and it represents an opportunity to better educate nurses about the types of services they should be capturing on the Minimum Data Set (MDS).

There are two other rate drivers for reimbursement that Plante Moran highlighted: how well ICD-10 diagnosis codes will be captured after PDPM, and the tapering of the PT and OT rates. Reimbursements for PT and OT will decline after day 20 of a given SNF stay, while the rate for SLP will be constant.

One point that Gadomski stressed — a point that echoed remarks made by PointRight executive vice president and chief clinical officer Steven Littlehale at the NIC spring conference in San Diego — is that therapy minutes are no longer factored into the rate calculation. And that may be part of the reason why providers doing well under RUGs are projected to see declines in reimbursement.

“The items that are driving PDPM are not the same items that are driving RUG reimbursement,” Littlehale said in a presentation at the conference. “That’s the big deal.”

Plante Moran’s data analysis bore his theory out. CMS will keep a close eye on therapy patterns in the immediate wake of the change, and providers have to be sure that they’re providing appropriate therapy delivery. But Plante Moran studied the therapy component of reimbursement under RUGs and PDPM, including the rate tapering for PT and OT, and found a notable decline in rates from RUGs to PDPM for providers with higher RUGs groupings.

The sample the firm used saw a roughly $25,000 reduction in PDPM reimbursement; about $22,000 of that came from therapy, Gadomski said.

“Our opportunities for reimbursement under PDPM are really going to be in nursing and in the NTA rate component,” she explained. “So I think it is important that providers understand when they’re doing through financial impact analysis, that they know where any type of increase or decrease is coming from from a reimbursement standpoint.”

From PDPM to unified post-acute payment

One important point to remember about PDPM is that it’s not going to be the final word on reimbursement, both Littlehale and Plante Moran argued.

The IMPACT Act of 2014 requires the creation of the unified post-acute care assessment, which would build off the Minimum Data Set to allow the government to reimburse for care in a way that is site-agnostic, Littlehale said at the NIC conference.

“Skilled nursing will be seen as the best deal in town for quality outcomes at lowest costs,” he said. “So I am very excited about this, but know that PDPM will morph into this — it is a stepping stone to getting here.”

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