In PDPM’s First Three Months, ‘Generally Everyone’ Netted Payment Increases

In the skilled nursing world, a steady chorus of voices has warned that the new Patient-Driven Payment Model will not stay budget-neutral, as the federal government intended — and new findings from the consulting firm BKD back up their assertions.

To get a snapshot of operator performance during the first quarter under the new Medicare reimbursement system for SNFs, BKD collected a sample of billing data from October 1, 2019, when the new system took effect, through December 2019.

“Keep in mind that this new reimbursement system was intended to be budget-neutral while just shifting the focus from where we’ve been focused on the therapy volume to the patient’s condition,” BKD partner Camille Lockhart said on the webinar on Wednesday. “However, we are seeing in this first quarter that generally everyone that we’ve looked at has an overall increase on their average reimbursement, based on their respective billing.”


By planning for the new payment system to be budget-neutral, the Centers for Medicare & Medicaid Services (CMS) envisioned that payments under PDPM would equal payments to SNFs made under the Resident Utilization Group — Version IV (RUG-IV) system that was in place before the current reimbursement model.

But BKD’s findings were in line with other studies about the effects of PDPM. An analysis from Zimmet Healthcare Services Group and its affiliated data service, CORE Analytics, found Medicare reimbursements of $614.96 per patient day in October for the average SNF, compared with $562.89 under RUG-IV.

Marc Zimmet, president and CEO of the reimbursement consulting firm, was blunt in his assessment of what that means in one of Skilled Nursing News’ year-end executive outlook pieces.


“The illusion of PDPM budget-neutrality is already over,” he wrote. “We should enjoy the largesse while it lasts, but prepare for the inevitable correction long before 2020’s back-to-school sales are over.”

It should be noted that there is a one-time increase associated with the residents in a facility who were there prior to the start of PDPM, who had to have an Interim Payment Assessment (IPA), Lockhart said on the webinar. But even with that potentially skewing the numbers, the billing sample showed significant increases.

“But those increases also varied significantly,” Lockhart noted. “So it’s kind of still out there in terms of what the jury’s going to say. I think though, if we do continue to see this increase, I suspect that there are going to be parameters put around the system — because once again, it was to be budget-neutral.”

How CMS is looking at therapy

The webinar, which solicited questions from the audience for BKD’s panel of experts, featured several questions related to therapy, but three stood out for what they might mean for the future of providers under the new system:

  • What changes in therapy utilization have occurred?
  • What levels of reduction, if any, will trigger audits by CMS, and what will those audits look like?
  • When can we stop worrying about historic therapy levels under RUGs and measure rehab success based on outcomes?

These are all questions that have come up early in the transition to PDPM, but it’s too early to assess the changes concretely, Chris Murphy, a BKD partner, said on the webinar.

Providers have been thinking hard about the need to balance volume, financial considerations, and quality, while also wondering about the scrutiny they’ll invite from CMS, he added.

“We heard CMS acknowledge that part of PDPM’s aggressive timetable related to their perception that rehab was overutilized,” Murphy said. “So CMS expects a decline.”

As SNFs go further into PDPM, it wouldn’t be hard for therapy-intensive organizations to eventually implement a 25% reduction in therapist hours, according to BKD’s modeling. What will matter is the metrics, and whether the quality measures (QMs) improve or worsen after any PDPM-related reductions.

“Ultimately, if your rehab goes down, and your outcomes don’t — so pressure ulcers QMs don’t decline, your readmission QMs are stable or improve, and your functional scores improve — you’ve got a good story to tell as CMS scrutinizes that,” he added.

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