At the start of the Patient-Driven Payment Model in October of 2019, most skilled nursing operators held firm with their contract therapy partners, and planned on using 2020 to evaluate those partners before any changes, whether to a new provider or making the move to in-house therapy. COVID-19 obviously shifted the industry’s focus, and as we approach the end of year two under PDPM, operators might now consider evaluating the performance of their contract therapy provider as they prepare for potential contract negotiation.
The most significant impact to therapy under PDPM was the shift away from utilizing therapy minutes as a means of calculating reimbursement. The shift away from minutes prompted therapy providers to change contract pricing, which was previously based on resource utilization group (RUGS) levels.
“Contract therapy providers shifted their pricing to either a fixed per-diem rate or a percentage of the full PDPM rate or the therapy component,” says Tom MacDonald, president of Axis Healthcare Consulting. “The shift in pricing can provide an incentive for companies to deliver fewer therapy minutes as it reduces labor costs without reducing the amount they are paid.”
MacDonald suggests skilled nursing operators should use the following five measures to evaluate potential changes in service delivery and performance under PDPM.
Therapy utilization
Six months into PDPM, SNF operators were trimming their therapy staffs, some by as high as 10%. The only reason to lay off staff would be in expectation of lower therapy volumes.
SNF operators should ask their contract therapy partner how the average therapy minutes-per-patient compared to what was delivered under RUGS. If there has been a reduction in minutes delivered there should be a satisfactory explanation as to what is driving the reduction and how it is impacting patient care and outcomes.
Patient outcomes
Measuring any change in patient outcomes under PDPM is another means a SNF has of evaluating its contract therapy provider. MacDonald suggests measuring patient outcomes during the first six months of PDPM and comparing it to the prior twelve months.
“Obviously there were many challenges in caring for patients the past year, so it is probably best to compare outcomes prior to the start of the pandemic,” he says.
If there was a drop in patient outcomes, operators should determine the cause, whether a drop in the number of minutes of therapy delivered or some other factor.
Group and concurrent therapy
The change to PDPM no longer discouraged providers from delivering group or concurrent therapy. That is good news for SNFs, as the social interaction that occurs in that setting can encourage and motivate patients.
“There are real benefits, particularly related to social interaction, for delivering group therapy,” MacDonald says. “The decision to deliver therapy in this fashion should be driven by patient interests, not to reduce labor costs.”
SNF operators should be reviewing how much group and concurrent is being delivered and make sure it is clinically appropriate and in the best interests of the patients.
Therapy costs
Evaluating the cost of therapy under PDPM involves more than simply comparing monthly invoices to identify changes. Lower therapy bills under PDPM do not necessarily indicate a reduction in therapy costs. Operators must compare therapy costs to the volume of therapy being delivered, MacDonald says.
“The most effective way of comparing therapy costs under PDPM versus RUGS is to look at the price-per-minute of therapy being delivered,” he says. This will provide an apples-to-apples comparison of pricing under PDPM versus RUGS.
SNFs must also compare how therapy billing has changed by looking at each payer group, while also comparing therapy invoices to see if there was a shift in the amount billed under the other payer groups.
Contract terms and pricing
The move to PDPM prompted significant changes to the terms and pricing offered by contract therapy providers. Under RUGS, most therapy providers charged a per-diem rate based upon each patient’s RUGS category. The RUGS pricing structure made it easy to compare contract pricing among different therapy providers.
According to MacDonald, the move to PDPM resulted in multiple contract pricing methods that made comparison more challenging.
“The three most common pricing methods under PDPM are to charge a percentage of the therapy component, a percentage of the full Medicare rate or a flat per-diem rate,” he says. There are merits to each model; the key is understanding how the pricing model and terms will translate into monthly costs, and how that may impact the delivery of therapy.
“The old adage that you get what you pay for certainly applies with contract therapy pricing,” MacDonald says. “You want to be sure your contract terms and pricing will be sufficient to provide the appropriate amount of therapy to your residents.”
Agencies should make it their practice to periodically evaluate the performance and value of any vendor, he says. That is particularly true in the event of a significant change that may impact the business relationship.
The shift to PDPM certainly qualifies as a significant change and one that should prompt skilled nursing operators to evaluate their therapy contract partner to ensure they are receiving the required services at a fair price.
This article is sponsored by Axis Healthcare. To learn more about how Axis can help you evaluate your contract therapy provider, including evaluating contract terms, visit AxisHealthConsult.com.
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