PDPM 101: What Skilled Nursing Providers Need to Know Now

With a new Medicare payment model for skilled nursing facilities just months away, operators who haven’t started planning for the changes are already months behind.

Skilled Nursing News has been reporting on the new Patient-Driven Payment Model (PDPM) since the day it was finalized last July 31, and we’ve spent those eight months speaking to a wide range of industry professionals — from therapy executives to individual SNF operators to consultants whose phones have been ringing off the hook since last summer.

At this stage in the game, providers seem to be falling into two main camps: cautious optimists who see the potential for new revenue streams under PDPM, and still-confused pragmatists trying to wrap their heads around the new requirements and all the attendant paperwork and training needs.


While the former group may be more vocal in the trade press, the latter group could be larger than one might think. For instance, at a recent industry conference, a presentation on the nitty-gritty details of PDPM reimbursements ran up against its time limit, and the speaker asked the crowd if they wanted to continue past the scheduled session end. Three-quarters of hands in the room shot up, and the discussion went on.

In short, therapy hours will no longer drive reimbursements. Providers will receive Medicare payments based on their patients’ care needs, bringing the focus back on individual residents and away from meeting volume benchmarks.

While we can’t recommend basing an entire PDPM strategy on one article — or even one conference full of reimbursement programming — we wanted to present a list of top-level action items for skilled nursing executives to consider as they stare down the October 1 implementation date.


The more things stay the same

Though it seems counterintuitive, providers need to remember that despite all the talk of sea changes in Medicare reimbursements, the bedrock of skilled nursing care isn’t changing: Residents must still qualify for Medicare coverage after spending three nights in a hospital, with a proven need for skilled care that they cannot receive in any other environment.

“Skilled need isn’t going away. You still have to have presumption of coverage. That is not going away,” Janet Mahoney, founder and CEO of Arete Rehab, said at the American College of Health Care Administrators’ (ACHCA) annual convocation in Louisville, Ky. earlier this month. “The basic tenets of Medicare coverage aren’t changing.”

What’s more, the Centers for Medicare & Medicaid Services (CMS) won’t be amused if a given building’s census changes substantially overnight. If a patient needed a specific level of rehabilitation or nursing service on September 30, he or she likely will still need it on October 1 — and any wild swings will bring the attention of regulators itching to crack down on provider behavior in order to maintain PDPM’s budget neutrality.

And those who fail to heed those warnings will be ignoring the recent past. Speaking at the conference, Mahoney presented industry-wide data showing how therapy minutes routinely spike into the ultra- and very-high categories during assessment periods under the current system, only to fall outside of those timeframes.

Those patterns, which appeared to serve reimbursement dollars more than patient need, were part of the reason CMS elected to shift to PDPM in the first place: The new model incentivizes resident complexity, not therapy volume, with the goal of rewarding providers for offering the correct patient-centered care.

“This is what caused where we are today,” Mahoney said.

Let nurses quarterback again

Under the soon-to-be retired Resource Utilization Group (RUG) system, therapists often dictated a resident’s overall care plan, as their services formed the backbone of Medicare reimbursements. But therapy no longer driving the reimbursement bus, nurses will once again return to the quarterback role they had previously held in in the SNF environment.

At Signature HealthCARE, preparing for PDPM means the addition of 600 more nurses between now and October, as management looks to lower nurse-to-resident ratios in order to provide the most patient-centric care possible. In addition, the base nursing reimbursement rate — along with non-therapy ancillaries, or NTAs — will also provide consistent funding sources for providers.

“Therapy will always be there — the patients will get the care they need under therapy — but it just won’t drive the reimbursements as the nursing components will,” Signature vice president of data informatics and management information systems Vinnie Barry told SNN.

Nurses may also become individual facilities’ point people for handling the new reimbursement paperwork burdens. Accurately recording residents’ diagnoses and specific medical issues will be vital to receiving the proper compensation for the services — and while experts are split over the exact coding expertise needed to get the job done — front-line nurses and Minimum Data Set (MDS) coordinators will need to be perfect when performing initial assessments.

“The pressure in this system really falls to the nurses: a lot of the responsibilities and the pressures of maintaining strong documentation that supports skilled care,” Marc Zimmet, president of Zimmet Healthcare Services Group, said during an event earlier this winter.

That doesn’t mean that therapists will take a back seat, however; residents will still require physical therapy, a key cornerstone of skilled inpatient care. The challenge moving forward, according to BKD director Robert Lane, is ensuring that all employees in a nursing home work together to focus on patient needs and outcomes.

“They’ve got to link arms and collaborate better than they ever had before, and that doesn’t matter whether it’s in-house or contract therapy,” Lane said. “You’ve got to be in lockstep together.”

Don’t lose sight of other challenges

CMS hasn’t conducted a complete overhaul of the Medicare payment system for skilled nursing facilities since the late 1990s, and the move has dominated the discussion in the industry since last July — from conferences to earnings calls to the mergers-and-acquisitions landscape.

But since that Clinton-era shift into RUGs, Medicare fee-for-service has slowly become the dinosaur of the nursing home reimbursement world. In 2017, Medicare accounted for between 12% and 18% of the typical SNF’s overall payor mix, according to a recent analysis from professional services firm Plante Moran. Medicaid continues to serve as facilities’ bread-and-butter cash source, with managed Medicare plans quickly eating into the overall pie.

While they don’t reimburse nearly as much as FFS Medicare, Medicaid and managed plans base their math on the RUGs system — which CMS will no longer support starting in October 2020. As a result, operators need to have frank discussions with their local Medicaid contacts and participating managed-care plans in order to have an idea of what to expect once RUGs support finally disappears.

“That is pushing the Medicare Advantage and all the state Medicaid programs that are case-mix adjusted towards accelerating their conversion,” Lane said of the Medicare shift. “So that’s another risk.”

Those changes come on top of the problems that Medicare Advantage and Medicaid already bring to operators, with their lower reimbursements and unique pressures — including length-of-stay pressures from MA plans that have forced operators to radically rethink their census strategy. And buried in the PDPM news is the fact that another set of changes — the final roll-out of the new Requirements of Participation — is set to take effect on November 28.

“It is probably the most complex time I’ve ever seen in the industry,” Kris Mastrangelo, president and CEO of consulting firm Harmony Healthcare International, said.

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