PDPM’s Effects Could Stretch Far Beyond Medicare for Skilled Nursing Facilities

On paper, the Patient-Driven Payment Model (PDPM) will only affect one pillar of the payment equation for skilled nursing facilities. But as players start to unpack the coming rule changes, PDPM’s reach begins to extend far beyond Medicare.

Medicare Advantage and Medicaid frequently base rate calculations on the existing Medicare structure, a pair of experts noted at the American College of Health Care Administrators’ (ACHCA) annual convocation in Louisville, Ky. — and those other payers will increasingly take cues from the PDPM system once the current model goes away.

The Centers for Medicare & Medicaid Services (CMS) will no longer support the existing Resource Utilization Group (RUG) system starting in the fall of 2020, BKD director Robert Lane said Monday, causing a cascading change to the multiple ways SNFs receive reimbursements.

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

Much of the PDPM preparation discussion has focused on Medicare-reimbursed therapy services, as CMS shifts the incentives away from the volume of physical, occupational, and speech therapy and toward the complexity of residents’ conditions. But because many Medicare Advantage plans and state Medicaid programs base their rate calculations on the Medicare system, change will be coming to these cash sources as well — just not all at the same time.

Once PDPM takes effect in October 2019, all of the payers that use the RUG system will have until September 30, 2020 to adjust their rate calculations accordingly, and the variety of changes will put even more pressure on skilled nursing staff responsible for proper coding and billing.

“They’re going to have to be juggling,” Lane said of Minimum Data Set (MDS) coordinators and other staffers who must work with the multiple concurrent models. “What’s the opportunity there for mistakes to be made?”

The waterfall effect could end up having an even greater impact on nursing homes than the therapy changes: Despite all the industry attention on the Medicare reimbursement shifts, the program only represents about 10% to 15% of the average SNF’s total income, according to a recent analysis from Plante Moran. Medicaid payments typically account for half or more of a building’s total reimbursements, with managed care plans gobbling up an increasing share of the remainder.

Save for a rainy day

While Lane and his presentation partner, Aegis Therapies national director of outcomes and reimbursement Bill Goulding, expressed optimism about the potential for providers to adapt to the coming system, they both warned that CMS will be monitoring provider behavior closely in the weeks and moths immediately after the change takes place.

Because PDPM was designed to be budget-neutral, any significant provider reimbursement gains will likely draw attention from CMS. In particular, Goulding advised providers that see short-term financial gains under PDPM to stash that surplus away for a rainy day, because CMS could move swiftly to adjust rates downward to ensure revenue neutrality.

“They might not wait a year to make an adjustment. They did it with RUGs. They might just wait a couple of months,” Goulding said. “Be aware that there might be a second wave coming.”

Group and concurrent danger

Operators and consultants have frequently floated group and concurrent therapy as a key strategy shift once PDPM hits: With therapy no longer generating reimbursement dollars, the thinking goes, conducting sessions simultaneously will help providers bring costs down and offset some of the negative effects.

That said, CMS will be watching to ensure that providers don’t shift residents en masse into these services. If a building’s management insisted that a certain cohort of residents required one-on-one, ultra-high therapy all the way up until October 1, then suddenly shifted them into as much group and concurrent therapy as possible, CMS is bound to notice — and potentially work to claw back some of the reimbursements from the old RUG system.

For that reason, Lane advised against making “knee-jerk” reactions to prepare for PDPM.

“They’re going to be measuring: Why are you only doing this therapy right now when you needed all this therapy September 30 to October 1?” he said of CMS. “What’s the difference here?”

Under PDPM, CMS capped group and concurrent therapy at 25% of a resident’s overall care plan. Though the move drew the ire of the American Health Care Association, whose CEO described the move as an unjust intrusion by Washington into individuals’ medical decisions, the use of group and concurrent services is typically below 1% under the current system.

In addition, CMS won’t be immediately penalizing providers that go above the 25% threshold for individual residents, Goulding said, instead listing the facility as “non-compliant” — a move that could indicate future penalties.

“Don’t take that lightly. That’s something CMS is telling you for a reason,” Goulding said.

Lane agreed.

“I think it’s interesting that they chose the phrase ‘non-compliant,’” he said. “I think that’s a bellwether of things to come.”

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