As the Centers for Medicare and Medicaid Services (CMS) continues to evaluate the “true” budget neutrality of the Patient-Driven Payment Model (PDPM), it’s clear COVID-19 has impacted usage of the new payment model.
A report from professional services firm CliftonLarsonAllen (CLA) found the median Medicare revenue per patient day (RPPD) increased 7% in 2020 under PDPM, compared to 2019.
Data suggest COVID patients have “certainly” impacted this increase, CLA noted in its report, while adding that the increase has helped to partially offset lost revenue from decreased occupancy.
“Think about the severity and volume of COVID cases SNF operators saw in 2020. The clinical needs and corresponding PDPM reimbursement run in tandem with the medical severity and number of COVID cases,” Stephen Taylor, a principal within CLA’s health care group, told Skilled Nursing News in an email. “The PDPM reimbursement model gave SNFs more ability to code based on the clinical complexity of COVID-positive residents.”
The correlation between occupancy revenue and Medicare RPPD will continue to change in 2022, Taylor said, with the clinical environment looking very different than it did in 2020.
Median occupancy was 77.5% in 2020, down from 85% in 2019. While this is the first year the median occupancy rate dipped below 80%, CLA noted some states were impacted by occupancy dips harder than others.
Northeastern states with historically strong occupancy rates experienced the highest decline at 10%, while midwestern states had half the occupancy dip and quicker recovery.
“Occupancy was increasing throughout 2021. It was lower than 2020 because it started lower and there has been a slow rate of recovery,” explained Seth Wilson, data analyst manager for CLA. “I don’t see 2022 being a decrease. However, the rate of recovery has decelerated a great deal, so there’s much uncertainty as to what the pace looks like in 2022.”
As vaccinations and boosters better protected residents in 2021, the 7% Medicare RPPD increase dropped off somewhat, according to the latest NIC MAP data released by NIC MAP Vision.
The statistic declined 0.8% compared to October 2020, NIC MAP Vision authors noted, due to less reimbursement needed for coronavirus patients.
PDPM, which replaced the Resource Utilization Group – Version IV (RUGS-IV) on Oct. 1, 2019, was designed to shift incentives away from therapy volume and toward treating patient needs. CMS created PDPM to maintain the same spending amount as the old RUGS system as well, but instead saw a staggering 5% increase in overall revenue gains; that translates to about $1.7 billion.
Even without COVID-19 claims PDPM is not budget neutral, CLA said in another report released in August.
Cynthia Morton, executive vice president of the National Association for the Support of Long-Term Care (NASL), said she believes it will be difficult for CMS to separate PDPM from COVID-19 as the pandemic continues on into 2022.
“COVID reaches into everything,” Morton said. “I think CMS has an ongoing challenge to say, ‘OK, we’re going to apply this parity adjustment, because we’ve been able to say these XYZ aspects of PDPM are untouched by COVID, therefore we can say that we spent, you know, too much, and we want to pull some of it back,’ but COVID is just so pervasive.”
In the SNF Prospective Payment System (PPS) Final Rule proposed in April, CMS attempted to justify potential parity adjustments to PDPM using four months of data – October 2019 to January 2020 – as a “pure” look at the payment model, Morton said.
“COVID doesn’t seem to be ending, it continues to have a significant influence on the data. It influenced almost all of 2021 and we’re just a month into January 2022. it’s getting more and more difficult to separate the two,” noted Morton.
From the second through fourth financial quarter of 2020, the COVID diagnosis code was overwhelmingly the top code used by skilled nursing providers, CLA said; 14.4%, 13% and 18.9% for these three quarters respectively.
“I think it would be imprudent of CMS to take 2020’s PDPM data as a strong baseline when assessing the budget neutrality of PDPM. There are simply too many different variables in the 2020 and 2021 data,” added Taylor.
The next highest diagnosis code was for urinary tract infections, an average of 3%, in comparison.
Thankfully for operators, CMS said in July it would hold off on adjusting PDPM as part of its SNF final rule. Potential changes were kicked to FY 2023, a decision aging services like the American Health Care Association (AHCA) were glad to see.
Morton said there hasn’t been further talk of parity adjustments beyond what CMS announced in April and July.
“They are tight lipped with respect to their thinking and how they might be preparing for next year’s rule,” Morton said. “I think we won’t know until that proposed rule is released.”
Usually CMS issues its proposed rule in April and finalizes that rule in July.
Morton said she believes the model will continue in some capacity.
“My hope is that CMS will not rush into a PDPM adjustment,” said Taylor. “The industry is grappling with too many variables at the moment … we need time for the industry to normalize a bit.”
The CLA report went on to say not only were PDPM payments were affected by COVID – the rising cost structure for skilled nursing facilities tied to infection control, personal protective equipment (PPE), hero pay and extensive testing will likely stick around.
SNF median growth rate of operating expenses was 2.6% for 2020 up 0.4% from 2019.
“As infection rates have decreased and we have gained the clinical upper hand, some of these expenses could normalize,” CLA authors said. “However, we expect agency staffing, competitive wages and benefits, and infection prevention to have continued effects on cost structure.”
Taylor served as the primary author for the report. Contributing authors included Wilson and CLA’s Matthew Wocken, principal.
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