How Skilled Nursing Operators Can Survive the New PDPM Compliance Landscape

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With less than a month to go before the implementation of the new Medicare payment system for nursing homes, most providers should have a firm plan in place to effectively capture reimbursements on October 1.

But as the Patient-Driven Payment Model (PDPM) transitions from a proposal to a reality, operators need to prepare for the next set of challenges ahead: the predicted wave of compliance issues that federal officials will likely flag in 2020 and beyond.

PDPM — which shifts incentives away from therapy minutes and toward resident acuity — will bring with it a host of potential areas to boost reimbursements, from depression treatment to speech therapy to hospice services. In turn, the Centers for Medicare & Medicaid Services (CMS) is poised to root out any major shifts in care plans that it can directly tie back to a financial incentive and not patient need.


“The government has much more data than you do,” Marie Infante, a health care attorney, said during a presentation at Zimmet Healthcare Services Group’s annual conference in Atlantic City, N.J. last month. “They have people that are tasked only with the job of analyzing it and trying to find these trends.”

As a result, according to Infante, it may not be wise for operators to jump headfirst into providing new specialty services on October 1.

“You don’t necessarily want to be the first out of the box with dysphasia, altered diets, dementia, and depression — because that’s going to put you in the crosshairs of someone’s enforcement efforts,” Infante said.


Instead, Infante advised operators to stop and think before implementing any significant changes to a given facility’s care offerings and specialty services.

“Don’t just jump in and start doing things,” she said.

CMS has drawn a clear link between PDPM’s particular reimbursement math and instances of fraud under the current Resource Utilization Group, Version IV (RUG-IV) payment model. Because nursing home operators and therapy providers received Medicare dollars based on volume of services, unscrupulous actors had an obvious incentive to provide as much therapy as possible.

The federal government responded with numerous high-profile investigations into potential False Claims Act violations resulting from medically unnecessary therapy services, leading to sizable settlement payments for operators — including $30 million from Signature HealthCARE and $53 million from Genesis HealthCare (NYSE: GEN).

PDPM is supposed to change that by decoupling a given SNF’s finances from the amount and intensity of the services it provides. Instead, the model was designed to properly compensate a facility based on the care it provides to each unique resident. That said, a wide range of potential revenue-boosting strategies has emerged as operators — often facing bare-bones Medicaid reimbursements and other pressures — look for ways to maintain their financial health through the changes.

Ensuring that the patient remains at the center of all care decisions will help providers avoid scrutiny, and that starts with airtight clinical documentation at the nursing level. As long as its facilities can clearly demonstrate that Resident A actually had the medical conditions that necessitated a certain course of treatment, operators can avoid significant compliance headaches.

“It’s easy to document therapy services,” Infante said. “Logs, minutes, checkmarks — tangible things.”

But third-party vendors also provide a significant amount of services in skilled nursing facilities, and nursing home operators need to be proactive in clearly defining their partners’ responsibilities for compliance under PDPM.

“Don’t take things for granted,” Ari Stawis, Zimmet’s director of professional services and development, said during the presentation. “When you’re reviewing your contracts, don’t just assume that this is something that’s going to be done.”

The need to bake ironclad compliance language into contracts will only increase, in Stawis’s view, as PDPM’s focus on each resident’s specific needs encourages “microsourcing” — the outsourcing of a variety of specialty services to third party vendors, from technology providers to optometric and physician groups.

“It’s not just certain vendors anymore. It’s really expanding, and we have to understand and realize that as we are outsourcing additional services than we have in the past, our compliance has to outsource with that,” Stawis said.

The exact terms to look for vary based on the type of relationship that a vendor has with a SNF, which Stawis grouped into two big tents: Vendors that work on an “under agreement” basis, meaning that they bill under their own provider number, or “under arrangement,” which bill Medicare under the SNF’s provider number. Each type of relationship has its own set of potential pitfalls and opportunities, making it important to know the difference and prepare accordingly.

But in general, Stawis offered a common-sense approach to avoiding problems with all types of vendors: Read the contracts thoroughly, and ask tough questions about how each vendor internally audits its own work and compliance efforts. Make sure that each side’s indemnity and risk is clearly defined, and always assume that a vendor’s bad actions could come back to haunt the SNF without clear language.

In addition, providers shouldn’t hesitate to have a seasoned attorney read any contracts before they sign on the dotted line.

“That will be money well spent,” Infante said. “It’ll save you a lot of headaches in the long run.”

And once those contracts are in place, it’s necessary to hammer home the ongoing importance of compliance efforts among the nursing home and vendor staff — from leadership on down.

“It’s not the compliance officer who does compliance,” Infante said. “In fact, everybody does compliance.”