Almost a Year After PDPM’s Implementation, Providers Still Miss Key Payment Drivers

In the months leading up to the implementation of the Patient-Driven Payment Model, the overhaul of Medicare reimbursement for skilled nursing facilities that was implemented last year, several factors emerged as crucial areas for thriving under the new system.

The Medicare rate of each facility is determined by a formula that draws from five care components: physical therapy, occupational therapy, speech-language pathology, non-therapy ancillary (NTA), and nursing. And for SNFs, how well they captured resident needs — and documented them under each of those components — determines their reimbursement for Medicare fee-for-service patients.

One of the resident needs critical to capture was the treatment of depression among SNF residents, which one expert described as vital to success under the new system.


But according to a webinar hosted by the operating and consulting firm Health Dimensions Group (HDG), providers have not made use of the depression and restorative nursing categories, both of which could mean they are “leaving money on the table,” according to the presentation.

“So far we have not seen a lot of uptake in either one of those two categories,” Brian Ellsworth, vice president of public policy and payment transformation at HDG, said on the webinar. “That may change as time goes on, but so far, that’s been pretty minimal.”

Speech-language pathology, on the other hand, has seen considerable variation in how providers made changes in this area. Some providers have seen “dramatic growth,” while others have not; the result is that there is not as much increase on the whole, he said.


Ellsworth drew his findings from an analysis of more than 2,000 PDPM stays over 32 SNFs, an analysis that was initiated during the first quarter of the year. Other findings included an almost 50% increase in the proportion of patient days in the Special Care High domain of the nursing category compared to the baseline projections from the Centers for Medicare & Medicaid Services (CMS).

Another consulting firm, the Zimmet Healthcare Services Group and its data affiliate, CORE Analytics, reported similar findings in an analysis of the new payment model in August. So-called PDPM winners were twice as likely to capture services under the Special Care High domain and 2.5 times as likely to record depression.

But as Ellsworth noted, depression is not the only missed condition among residents, at least when it comes to accurately capturing their condition to cover the care provided.

“Finally, we’re seeing missed non-therapy ancillary (NTA) co-morbidities — for instance, risk of malnutrition,” he said. “They’re not always captured. There’s a total of 50 co-morbidities and services that are counted for non-therapy ancillaries, and we’ve seen evidence in our coding audits that there’s evidence of those co-morbidities in the record, but it’s not captured in the payment system.”

That could mean the difference between performing well under PDPM and missing out on reimbursement for services provided, as the Zimmet analysis noted in August.

COVID-19 looms over therapy

Even though PDPM pre-dates the COVID-19 pandemic, it hasn’t been untouched by the public health emergency. Though one analysis noted that the financial picture for SNFs would have been even worse under the Medicare model that PDPM replaced, COVID-19 has still led to some unexpected hurdles when it comes to revenue.

For one thing, group and concurrent therapy — a modality of delivery that received more favorable conditions under PDPM and was widely expected to be a driver of savings — is all but impossible under pandemic conditions, with group activities suspended by CMS in the early days of the pandemic.

This is of particular interest given that many therapy contracts signed at the beginning of PDPM were “status quo” contracts, designed generally to pay roughly the same as they did prior to the new system, Ellsworth said.

“Those contracts should be reevaluated now, as therapy practices have clearly changed: first under PDPM, with things like group and concurrent therapy as well as … the change in incentives, but also due to COVID-19, where it’s been harder for therapists to get access,” he said.

Operators should be changing the contracts to be outcomes-focused, according to Ellsworth, with the trajectory moving toward paying for a value-based approach.

In the proposed Medicare fiscal 2021 payment rule, several commenters had suggested incorporating COVID-19 diagnosis codes and costs into PDPM, with possible amendments including a co-morbidity added to the NTA component based on an ICD-10 code of a lab confirmed, pending, or inconclusive COVID-19 test. This would better reflect the increased costs surrounding testing, personal protective equipment (PPE), and other expenses.

CMS, however, said it did not have enough viable cost data or approvals as of yet in the case of inconclusive COVID-19 tests, though the agency indicated it is looking at these issues and could consider them in future rulemaking, Ellsworth said.

He also emphasized the importance of appropriately coding isolation stays for the nursing component — which can put patients into one of the highest paying case-mix groups of PDPM.

“For coding isolation stays, it’s important to understand the exact requirements, including that there’s an active infection, in order to make sure that you meet the qualifiers for it,” Ellsworth said.

Getting occupancy back on track

One of the side effects of COVID-19 has been plummeting occupancy in SNFs, with elective surgeries suspended in a bid to free up hospital capacity earlier in the pandemic.

The occupancy drop has occurred across markets, Ellsworth said, partially because as these surgeries resumed, outpatient procedures have outpaced inpatient ones. That affects the need for rehabilitation, and consumers who have some choice are also avoiding the SNF setting, he noted.

“There’s been clearly evidence of increased care at home and delayed long-term care placement from folks in the community,” Ellsworth said. “This has occurred in part because more folks are at home due to being unemployed, and they’re able to care for their relatives. But it’s also in occurred in part due to consumer fear, and some of the bad press that that’s come out.”

He also noted the grim statistics of deaths in facilities that have had outbreaks; one study in JAMA examining the New York City, Cleveland, and Detroit markets found about “six months’ worth of deaths in nursing homes in about a three-month period this spring,” Ellsworth said.

That makes it all the more imperative for SNF providers to understand what is driving their census, he said.

Operators have to understand what the future demand for their services will look like, Darrin Hull, executive vice president of consulting at HDG, said. It will also mean opening up conversations with local hospitals and payers, and seriously considering a pivot to a more medically complex model, he argued.

“Hospital and value-based payer pain points are critically important to understand, where you can provide relief to acute care hospitals and health systems,” Hull said. “[It will] really put you at the front of the line as far as partnership opportunities.”

Companies featured in this article: